3

THE INDIAN PARTNERSHIP ACT , 1932

3 units
Unit 1
General nature of partnership
 Definitions
relation between persons who have to share the
profits
partnership is the
agreed of

for all
business carried on
by all or any of them
acting section 4

is
partnership created
by agreement
and Status
not
by
- Section 5

Elements of partnership
1 Association of two or more
people
.

only persons recognized by law can

-

↓ enter into a
partnership .

acquisition of gains

2 .

Agreement by all persons concerned

this element relates to

voluntary
-

4 .

Agreement to Share
profits contractual nature of
partnership
.

- but to share losses is not

an
agreement an

essential element .

in the event of losses unless otherwise , these must be borne in Natio

agreed profit-sharing
-

Business for [Cardinal principle]

5 Carried on
by
all or
any of them
acting all
.
.

should mutual between the

there be a
binding contract of
agency partners
-

True test of partnership

For
determing existence of
partnership it must be proved
:

is only
-

It a

1 There between the concerned prime facia evidence

was an
agreement all persons
.

2 The to share the profits of business Conclusive

.

agreement was a and and not a

for
3 the business is carried on
by all or
any of them
acting all .
 Kinds of partnership

where the partnership comprises of

immovable the instrument

property ,
of

partnership must be in
writing , stamped
↳ Registered

section -
7
Ta
for prosecution
single adventure
of

↑↑ desirable
to avoid

disputes
in
writing
future

No fixed period has been made PARTNERSHIP DEED

11
·

as duration of partnership
2 .
No provision made as to the -> The document in
writing containing
determination of partnership .
various terms and conditions as to the

relationship of partners to each other

provisions
->
should b
stamped as of
Types of partners
per
Stamp Act , 1899

1. Active or Ostensible partner to absolve himself

liabilities fou acts

->
retirement -> of
↳ public notice of Other persons done
after his retivement .

2
Sleeping ou doumant partner
:

liable to
x
party)
↳ third

.
3 Nominal partner
↳ No profits lends his name
->
liable to third parties for

4 partner in profits only acts of

profit only

entitled to profits
↳
only
Incoming partner admitted as a partner into
:

s .

already existing firm with consent of all partners

6
Outgoing / Uetiving : liable to all acts until
.

notice of his retirement is

public given
7 :

Partnership by holding out section as

where a man holds himself out as a

partner ,
or allows others to do it , he is

stopped from the character he has upon the faith

then
denying assumed and of

which creditors be to have acted

may presumed .

A person himself by his words or conduct have induced others to believe

may ,

that he is he to him
a
partner or
may
have allowed others represent as a
partner
->
the result in both the cases is identical .
 BASIS Partnership Joint stock
company

distint from
Legal Status Not
legal entity a
separate legal entity members

is
Agency every partner an
agenent of the a member is not an
agent of the other

the firm the

other partners as well as members or of
Company .

firm must be distributed There is compulsion but

Distribution profits of the no such
usually
of profits among the partners according to the someportion of profit is distributed
terms of
partnership deed among the shareholders .

Extent of

liability
Unit-2
tioofns
partners
 section 9-38

General duties of partners - Section 9

bound to to be
are to carry on the business
greatest common
advantage ,

just and faithful to each other and to render true accounts

full information
and of all
things

to fraud-section
Duty indemnity for loss caused
by 10

Determination of
Rights and duties of partners by contract between
the partners - section 11

(1) Mutual
rights and duties of partners may be determined contract
by
between the
partners <express or implied by course of
dealing
12) Agreements in restraint of trade :

Notwithstanding anything contained in

section 27 of the Indian Contract Act , such Contracts provide that partner
may a

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 parties -

Section 12

has take part in the conduct of business

1
every partner a
right to
.

is in
2 .

every partner bound to

diligently attend his duties the conduct of business

to
decided by every partner has right express
difference
arising as to
->
his
3
any Ordinary matters
majority Opinion before matter is decided
->
.
.

In the nature without the

->
No
Change -> of business consent of all
partners

4
every partner has a
right to access to inspect and copy books
-
,

3 death of
partner ->
heirs/legal representatives/duly authorised
agents shall have
right to

Mutual
rights and liabilities

subject to contract -
Section 13

a) partner is not entitled to receive remuneration for

taking part in the Conduct of business

Sustained
b) partners are entitled to share profits equally and contribute equally to the losses
by
the firm

2) Where partner is entitled to interest on the Capital subscribed by him -> interest shall be paid only
out of
profits
d) partner for the firm
beyond the Capital is entitled
a
making -> the
purpose of
any payment ->
-

6%
int pa to receive
e) firm partner in respect of liabilities incurved
a shall
indemnify a
payments made and
by him

in conduct of business
↳
ordinary
↳ in to protect the firm from loss
emergency

fl to it
a
partner shall
indemnify the firm for
any loss caused
by willful
neglect in the

conduct of business .

11 determination of
rights and duties of
partners by contract
:

12 : The Conduct of business :

difference -> ordinary ->
majority
↓ matt25s
a)
right to take part b) to be bound
deligently to duties () nature
neirs R
,
legal ,
With
6) inspect , copy ,
access books e) In event of death - authorised
, agents
.
consent of all parties .

a) No remuneration 6) interest on capital from profits

13 Mutual
rights and Liabilities d) interest
:

losses Capital 6 %
:

b) profits pa
equally on
payment beyond agreed :

indemnify
Ordinate
f) partner shall firm for losses

e) right of firm to
indemnify partner for payment protect loss aue to acts of willful neglect .

the firm
Section 14 :
property of

Section 16
:

personal profits earned by partners

or from
-> use of
property
a) if partner derives from any -> business connection of firm
any
a -> or
->
transaction Of
profits for himself the firm
-> or firm name .

-> he shall account for the profit and it to the firm

pay
.

the
b) if a partner carries
any business of same nature as and
competeting
with that of the firm
for firm profits made him in that business
by
-> he shall account and to the all
pay
 Section 17
Rights and duties of partners after
change in firm
STCBP

new
/I
a) where in partner
change occurs constitution of firm comes
in
Some
partner
after
of term
expiry
fixed
-> the mutual
rights ,
E duties of the firm
out
goes carries on
↳ in the reconstituted firm -> remain same business other
↓
as than the
before the they were One for
which it was
change immediately originally formed
b) After firm
the
expiry of the term of the

remain far
-> same as
->
So as
they may be consistent with the incidents
of
they were before
expiry partnership-at-will

c) additional
where
undertakings are carried out as those in
respect to

-> carries out other adventures or

undertakings
-> remain same-original undertakings
or adventures

Section 18 :
partner is of firm for the purpose the business the firm
a
agent the of of
-

section 19 Implied
authority :
of
the
partner as
agent of the firm
in
to provisions of partner done to the usual
subject of section 22 act
carry on ,
way ,

the business of the kind carried the firm binds the firm
on
by ,
.

IA : -

> The
authority of
partner to bind the firm conferred
by section 19

of
2) Section 22 Mode
doing Act to bind firm
:

in order to bind a firm

an act/instrument done/executed by a

partner/ other person on behalf of

firm shall be done in the firm name ,

or
any other manner
expressing of

intention to bind
implying an the firm .

section 20 : -

Extention and Restriction of partners Implied Authority

partners Extend/Restrict implied authority
may -
by contract -> of
any partners

his implied binds

Any done within
authority the firm
act ->

is about the
unless : the person he
dealing with knows restriction

(08) does not know I believe that

partner to be a
partner .
 Section 21

Partners in
authority emergency
A partner has authority, in an emergency, to do all such acts for the purpose of protecting the firm from loss
as would be done by a person of ordinary prudence, in his own case, acting under similar circumstances,
and such acts bind the firm.

Section 3 : representation concerning is evidence

->
if its made in the

partners-> firm
affairs ->
made
by
of
against ordinary course
fium of business

section 24 : notice to partner

:

notice to firm
of
any matter
relating to ↓
affairs of firm

except in case of fraud

of partner for the

section 25 :
Liability a acts of the firm .

Every partner is liable

jointly along with the other partners and also
severally
for all the acts done while he is the partner of the firm -

firm for
Section 6 :
-Liability of the
wrongful acts of a
partner

->
by wrongful act or omission of an act of a partner in the
ordinary course of

with the
business or
authority of the other partners
N
loss or
injury is caused to
any third
party firm to the
the is liable therefore
↓
or
any penalty is incurred same extent as a partner

section 27 : -

Liability of firm for misapplication by partners

Where

within his apparent from

partner acting authority receives
->
a
money or
property
third and missapplies it (00)
a
party
->
the firm in the course business, receives from the
of money or
property third
party ; and
money
is misapplied by of while it is in the firm
or
property any the partners custody of the .

N
the firm is liable to
partner by holding out
section 28 : make

Good the loss

where holds himself out allows others to do it he is stopped

a man as a
partner or
,
then

from the of which creditors have

denying character upon the faith the
may preso
med to have acted

A have himself his words or conduct induced others to believe that

person may , by ,

he is have allowed others to do the in both

a partner ,
or
may
so
, result the

Cases is identical
 section Transferee of
29 :
Rights of a
partner's Interest

III transferee entitled to

is
only receive the share of profits of the
transferring partner ,

business/to require accounts/ inspect

↑
cannot interfere in the Conduct of to books

&) If firm is
dissolved/transfering partner ceases to be a
partner
↳ transferee is entitled to receive the share of assets to which
transferring partner is

entitled ,

section 30 :
Minors admitted to the benefits of partnership .

Legal Consequences of partner Coming In and

Going out - Section 31-35

Introduction of a partner section 31

11 Consent of all
existing partners needed

12) introduced
partner
does not become liable for acts of the firm done before
person as
any

Retirement of a partner section 32

with the in
by giving notice

consent of
accordance
in
Writing
With an
all others
express

agreement
 Expulsion of a
partner Section 33

(1) in the faith

Not expelled by any Majority Save exercise of good of powers conferred
-

the contract between the

partner
interest of p.s expulsion in

of faith
- interest
Test
good -
partner is served with a notice bonafide

↳ he is
given an
opportunity of
being heard .
of the firm

of partner
Insolvency a section 34

(1) on the date on which partner ceases whether or not

->
is : firm dissolved
order of adjudication to be partner is
hereby
made

(2) Where under the contract, the firm is not dissolved by adjudication of partner as insolvent

the -> for act of the firm

estate of partner is not liable
any

Liability of estate of deceased

partner section 35

where firm is not dissolved death

by of a partner
estate of deceased
partner is liable for acts done his death
not
any after

Rights of
outgoing partner to
Carry on
Competing business Section 36

he
carry such business and
may advertise ;
-

may on

- but subject to the contract on Contrary he not

; may
a) use the firm name

himself
b) represent as
carrying on the business of the firm or

c) Solicit with the firm before

the custom of persons who were
dealing he ceased as a
partner

in Certain to subsequent profits 37

Right of
Outgoing partner cases share
->

after death/ retirement -> if his assets still used -> they are considered debt -> 61 .
P A
.

Revocation Guarantee section

of
Continuing by change in firm 38
Unit-3
Registration and dissolution of firm
 Registration of firms

Application for
registration
section 58

consequences of
non-registration
-
section 69
is
Although registration of firms not
compulsory ,

the consequences disabilities of non-registration have pursuasive

yet or a

for
pressure their registration .

i) No suit in civil court

by firm other
co-partners against third
a or
party :

ii) No relief to partners for set-off of claim :

if action firm neither the firm

an is
brought against the
by a third
party ,
nor the

claim set-off to enforce the

partners can
any ,
or pursue other
proceedings rights
arising from
any
contract .

iii) Aggrieved partner cannot

bring legal action against other partner or firm .

does
Non-registration ,
not effect the
following rights : -

1 .

Right of third parties to sue firm or

partner

-
to dissolution
2 .

Right sue for or settlement of

accounts for of dissolved

,
or realization property of a

firm .

to
3 power of official
Assignees ,
receiver of court

release the
property of the insolvent partner and

tO
bring an action .

↑ right to sue or claim a set-off if value doesnt exceed

= 100 in value .

S .

Right to suit and

proceeding by legal representatives
of the deceased for accounts of firm
partner or

to realise the of the firm

property .
 dissolution of partnership blu all
partners .

->

Dissolution of firm
- sections 39-47

section 39
:

dissolution of partnership between all the

partners of a firm is called "Dis of firm

dissolution of partnership when

only or
partners retires
:

-> occurs one more or

becomes incapacitated from

acting as a
partner due to death , insolvency or

insanity , the
relationship blu such partner and other is dissolved ,
but the

rest decide to continue

may
.

-> In case of dissolution of firm

,
the partnership terminates as between each and

of the firm
every partner .

Modes of dissolution of a firm - Sections 40-44

dissolution
1
voluntary
.

with consent of all the partners or in

i) dissolution section 40
by agreement accordance with a contract blw all partners .

ii) Compulsory dissolution section 4

insolvent
↳
by adjudication of all the partners or of all the partners but one as

↳ by happening of any event which makes it unlawful for the business of the

firm to be carried for the to in partnership

on or
partners carry it on .

[when than is carried shall not cause the

more one adventure on, the
illegality of one

dissolution of the firm in respect of its lawful adventures and

undertakings .

iii) Dissolution on the happening of certain

contingencies : section 42

iv) Dissolution notice of

by partnership
at will section 43
 2022
May .

-
dissolution the section 44
.
2
by Court

a)
Insanity
b) permanent incapacity
c) Misconduct

breach of
a) persistent agreement
-> Embezzlement
->

keeping erroneous accounts

than
->
holding more cash allowed

->

refusal to show accounts despite repeated request etc .

e) transfer of interest

fl continuous or
perpetual losses

g) Just and equitable grounds .

deadlock in
->
management
the not in between them
->
Where partners are
talking terms

->
Loss of substratum

stock
->

Gambling by a partner on a
exchange .

consequences of dissolution [Section 45-55]

section 45 : liabilities for acts of

partner done

after dissolution
Section 48 :
Mode of settlement of partnership accounts

i) losses ,
including deficiencies of capital
-

paid out of profits

if
-> next out of Capital

ii) Assets of the firm shall be

necessary
-> Out of
partners individually
in [in
applied following manner : proportions in which the

they were entitled to

profits]

firm
section 49 :
Payment of debts and of
separate debts
 X

finition
onoPartneredDysKatues Fiumandfirm
4 nee

newship
~ at will

-
ticular partnership
~
v a l
duties of partner
#
to
indemnity for
loss caused
by fraud .

(2)
ermination
of rights and duties of partners by Contract

~12
c of
on business
d (5) uct
V 13 Mutual rights and liabilities 16)
-

of firm
#
operty
v 15 property of the firm
agation
of the

personal
profitsearnedby Partner
d ,
hange in the fire e

ot
to be h
Agent firm er of the

-
mplied authority of partner as agent of the firm

en
and s
Restriction io implied n
of partners authority
-
al partner's authority in
emergency
&
e of act to bird firm
doing
23 effect of admissions
by a
partner
24 effect of notice to
acting partner

25 Liability of a partner for acts of the firm

26
Liability of the firm for wrongful acts of a partner

liability firm for

27 of
wrongful acts of a partner
98 partners by holding out

29 Rights of transferee of partners interest

30 Minous admitted to the benefits of partnership

31-35
legal consequences of
partner coming in and
going out

to
36 Rights of
outgoing partner carry on
competing business

partner certain share subsequent profits

37 Right of
outgoing in cases to

Revocation in firm
38 of
Continuing Guarantee by change
 Elements of partnership
1 .
Association of two or more persons
.
2
Agreement
3
.

Business [Every occupation ,

trade and profession]
to
4 agreement share profits
5 Business Carried of them for all
on
by all or
any acting
.

Consequences of non registration of a firm -

sec 69

No firm
1 .

suit in a civil court

by or other co-partners against third
party
.
2 No belief to partners for set-off of claim

3
Aggrieved partner cannot bring legal action
against other
party or the firm
.

4 Third
party can sue the firm
.

Dissolution of firm by court [at the Suit of partner] - Sec 43

1
Insanity/unsound mind

2 permanent incapacity
.

3 .

Misconduct

4 persistent breach of
agreement
5 .
Transfer of interest

6 ·

Continuous/perpetual loss

7 .

Just and equitable grounds

 Important questions

Expulsion of a partner section 33

to the firm
transfer the immovable property belonging
.

191
the firm
into partnership on
behalf of
.

In enter