SPECIAL CONTRACT INTERNAL

ASSESSMENT II
Liabilities and duties of partners under the Partnership
Act, 1932

Dathatreya Kulathu Mahesh (23010324023)

Gaurav Nair (23010324031)
Hrigved Choudhari (23010324038)
Kripa Ann Alias (23010324046)
When two or more people come together as partners, they
can form a partnership firm. This partnership firm is
governed by the rules and regulations of the Indian
Partnership Act, 1932. The partnership is also governed
by the Indian Contract Act in areas where the
Partnership Act, 1932 is silent.

Definition of PartnershipSection 4 of the

Indian Partnership Act defines a
partnership as “Partnership is the relation
between persons who have agreed to share
the profits of a business carried on by all or
any one of them acting for all”.
 Duties of a Partner
The duties of a partner A partner is required to
come under multiple carry on the business to
sections of The the highest common
Partnership Act, 1932, advantage.
mainly sections 9, A partner is required to
10,16(a), 16(b) and 17. be just and faithful to
each other
Section 9 says that A partner has to render
to any other partner or
partners are legally
his legal representative
bound to carry out the
about the true account
business of the
and all the information
partnership firm. The
of all the things
general responsibilities affecting the
are: partnership firm.
 Section 10
Section 10 states that a partner should compensate for any damages caused to the firm
due to the fraudulent activities conducted by a partner
Section 10 of the Indian Partnership Act 1932: 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.
An important case law is Barbarilal v. Seikh Shukrulla:
(a) Partner is guilty of deceitful conduct.
(b) Partner has done such deceitful work in the conduct of the business of the firm.
(c) By the fraud of the partner, firm or other partners have suffered
loss.
The liability of partner to pay damages is based on the principle that if any partner
knowingly does an illegal act, he should pay damages to other partners for the loss
suffered by them
 Section 16

Section 16 of the Indian

Partnership Act governs
mutual rights and liabilities,
including profits and losses
sharing among partners.
 Section 16 (a)
If a partner derives any profit
for himself from any transaction
of the firm or from the use of
the property or business
connection of the firm or the
firm name, he shall a'ccount for
that profit and pay it to the firm
It was held in Velji Raghavji v.
State of Maharashtra that under
section 16(a) of the partnership
act, if a partner derives any profit
for himself from any transaction
of the firm or from the use of the
property or business or business
connection of the firm or firm
name, he shall account for that
profit and pay it to the firm.
 Section 17
Section 17 of the Indian partnership act talks about the general rights and duties
between parties
Right and duties of partners - Subject to contract (Between the partners) -
1. after a change in the firm - Where a change occurs in the constitution of a firm, the
mutual rights and duties of the partners in the reconstituted firm remain the same as
they were immediately before the change, as far as may be,
2. after the expiry of the term of the firm - Where a firm constituted fora fixed term
continues to carry on business after the expiry of that term, the mutual rights and
duties of the partners remain the same as they were before the expiry, so far as
they may be consistent with the incidents of partnership at will' and
3. where additional undertakings are carried out.- Where a firm constituted to carry
out one or more adventures or Undertakings carries out other adventures or
undertakings, the mutual rights and duties of the partners in respect of the other
adventures or undertakings are the same as those in respect of the original
adventures or undertaking.
Liabilities of a Partner
The liabilities of a partner are given under
various sections of the Partnership Act, namely 13,,
25, 26, ,27, ,35, and 45.
Section 13 deals with the mutual rights and
liabilities of a partner, which are subject to the
terms of the contract.
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
a partner shall indemnify the firm for any loss
caused to it by his wilful neglect in the conduct
of the business of the firm.
 Section 25
Liability of partners for the acts of the firm (Section 25): All the partners are jointly and
severally liable for the acts of the firms. However, they are liable only for those acts
which are done at the time he is a partner.
A few case laws related to Section 25 of the Indian Partnership Act include :
1. Murlidhar Chiranjilal v. Harishchandra Dwarkadas: In this case, the Bombay High
Court held that the provision of Section 25 of the Partnership Act, which deals with the
rights of partners to share profits, does not preclude the partners from sharing losses as
well. This case clarified the principle of mutual sharing of profits and losses among
partners.
2. Kshetra Mohan Saha v. Haran Chandra Ghose: In this case, the Calcutta High Court
emphasized the importance of complying with the terms of the partnership deed
regarding the sharing of profits and losses among partners. The court held that partners
are bound by the terms of the partnership deed, and any deviation from it would require
mutual consent.
 Section 26
When any
wrongful act or
omission is done In the case of Rustomji
by any of its Dorabji vs. Rustomji
partners in the Nowroji (AIR 1925
ordinary course Bombay 252), the
of its business
Bombay High Court
or with the
consent of dealt with the issue of
others partners expulsion of a partner
then the firm is under Section 26 of the
liable to the Indian Partnership Act
same extent as a
partner.
 Section 27
LIABILITY OF FIRM FOR MISAPPLICATION
BY PARTNERS. Where - (a) a partner acting
within his apparent authority receives
money or property from a third party and
misapplies it, or (b) a firm in the course of
its business receives money or property
from a third party, and the money or
property is misapplied by any of the
partners while it is in the custody of the
However, the firm will not be liable for
firm, the firm is liable to make good the
the property misapplied by a partner
loss. when the partner or agent has got that
property, not in the course of business,
It was held in the landmark case of Cleather v.
Such property was received by him not
Twisden, 28 Ch D 340 Wherever a party has under the authority of an agent but for
faith or deals with a partner and not within the his personal use.
firm, the firm may not be accountable.
 Section 35
LIABILITY OF ESTATE OF
DECEASED PARTNER. Where
under a contract between the
partners the firm is not
dissolved by the death of a
partner, the estate of a deceased
partner is not liable for any act
of the firm done after his death.
Say for example, A,B, and C are partners
in a firm, and C dies. C's representatives
won't be liable, if A or B decide to use the
firm's resources for illegal activities such
as smuggling and other illegal activities.
 Section 45
LIABILITY FOR ACTS OF PARTNERS DONE AFTER
DISSOLUTION. (1) Notwithstanding the dissolution of a
firm, the partners continue to be liable as such to third
parties for any act done by any of them which would
have been an act of the firm, if done before the
dissolution, until public notice is given of the dissolution :
Provided that the estate of a partner who dies, or who is
adjudicated an insolvent, or of a partner who, not having
been known to the person dealing with the firm to be a
partner, retires from the firm, is not liable under this
section for acts done after the date on which he ceases to
be a partner. (2) Notices under sub-section (1) may be
given by any partner.
In simple words, Section 45 endeavors to
protect third parties who have no clue about
the dissolution of firm and also the partners
of a dissolved firm from liabilities towards
third parties post-dissolution.
Thank you