Indian Partnership Act, 1932
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Sec 4 – “Partnership is the relation between
persons who have agreed to share the profits
of business carried on by all or any of them
acting for all.
Indian Partnership Act, 1932
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There must be a contract
Between two or more persons
Who agree to carry on a business
With the object of sharing profits
The business must be carried on by all or any
of them acting for all (i.e., there must be
mutual agency)
Indian Partnership Act, 1932
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Partnership at will – No provision regarding
duration of partnership
Particular partnership – Partnership formed
for a specific venture
Indian Partnership Act, 1932
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Actual or active partners
Sleeping or dominant partners
Silent partner
Partner in profit only
Sub partner
Partner by estoppel or holding out
Indian Partnership Act, 1932
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Cannot be a full fledged partner
But with the consent of all the partners can be
admitted to the benefits of partnership
◦ Partnership must be in existence before a minor
can be admitted to the benefits
◦ There cannot be a partnership consisting of all
minors
◦ If a minor is made a full fledged partner under the
terms of the partnership deed the deed would be
invalid
Indian Partnership Act, 1932
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Entitled to receive his agreed share of the
property and of the profits of the firm
Not personally liable to third parties for the
debts of the firm
Not entitled to take part in conducting the
business of the firm
On attaining majority, the minor must decide
within six months whether he would or would
not like to become a partner in
Indian Partnership Act, 1932
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On attaining majority, the minor must decide
within six months whether he would or would
not like to become a partner in the firm and
give public notice of his decision. If he
remains silent and fails to give such notice, it
will be presumed that he had elected to be a
partner of the firm
Indian Partnership Act, 1932
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Where the minor chooses not to become a
partner
◦ His rights and liabilities continue to be those of a
minor upto the date of his giving public notice
◦ He is entitled to sue the partners for his share of
the property and profits in the firm
Indian Partnership Act, 1932
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Rt
Rt
Rt
Rt
Rt
Rt
Rt
To take part in the conduct of the business
To be consulted
to Access the books of accounts
to Share in the profits
to Interest on capital
to Interest on advances
to indemnity
Indian Partnership Act, 1932
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Absolute duties
◦ Duty to carry on the business to greatest common
advantage
◦ Duty to be just and faithful inter se
◦ Duty to render true accounts
◦ Duty to provide full information
◦ Duty to indemnify for loss caused by fraud
◦ Duty to be liable jointly and severally
◦ Duty not to assign his interest
Indian Partnership Act, 1932
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Qualified duties
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Duty
Duty
Duty
Duty
Duty
Duty
Duty
to attend diligently to his duties
to work without remuneration
to contribute to the losses
to indemnify for willful neglect
to use firm’s property exclusively for the firm
to account for personal profits derived
not to compete with the business of the firm
Indian Partnership Act, 1932
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Every partner is the agent of the firm for the
purposes of the business of the firm.
The authority of a partner means the capacity of a
partner to bind the firm by his act.
This authority may be express or implied.
Expressly conferred by an agreement – express
authority
No partnership agreement or where agreement is
silent – implied authority
Indian Partnership Act, 1932
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Flows from the legal relations of the partners
Founded on the principle of agency
Subject to following conditions –
◦ Act done by the partner must relate to the normal or
usual business of the firm.
◦ Must be done within the scope of the business
◦ Act must be done in the name of the firm, or in any
other manner expressing or implying an intention to
bind the firm
Indian Partnership Act, 1932
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Acts within the implied authority
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Engaging servants for partnership business
Selling the goods of the firm
Borrowing money on the credit of the firm
Settling accounts with persons dealing with the firm
Indian Partnership Act, 1932
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No implied authority
◦ Submit a dispute relating to the business of the
firm to arbitration
◦ Enter into partnership on behalf of the firm
◦ Acquire immovable property on behalf of the firm
◦ Transfer any immovable property on behalf of the
firm
Indian Partnership Act, 1932
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Extension and restriction of a partner’s
implied authority (sec 20)– Partner’s in a firm
may by contract between them extend or
restrict the implied authority of any partner.
◦ Firm continues to be liable to a third party for any
such act which falls within the scope of the implied
authority of the partner
Indian Partnership Act, 1932
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Effect of admissions by the partner (Sec 23) –
Any admission made by the partner
concerning the affairs of the firm is a
sufficient evidence against the firm provided
the said admission or representation is made
in the ordinary course of business.
◦ If admission or representation is made beyond the
scope of the authority the firm will not be bound by
it.
Indian Partnership Act, 1932
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Effect of notice to acting partner (sec 24) –
Notice to a partner who habitually acts in the
course of the business of the firm any matter
relating to the affairs of the firm operates as
notice to the firm except in case of fraud.
Liability of partner for acts of firm (sec 25) –
Every partner is liable for all the acts done
while he is a partner
Indian Partnership Act, 1932
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Liability of the wrongful acts of the partner –(sec
26) Firm is liable to the same extent as the partner
Liability of the firm for misapplication (sec 27) – A
firm is liable to make good the loss where◦ (a) a partner acting within the scope of his apparent
authority receives the money or property from a third
party and misapplies it:
◦ (b) the firm in the course of its business receives money
or property from a third party and the same is
misapplied by any of the partners while it is in the
custody of the firm
Indian Partnership Act, 1932
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Registration of firms is not mandatory
Time – Registration may take place at any
time during the continuance of the
partnership firm.
Procedure – An application in the prescribed
form along with the prescribed fee has to be
submitted to the registrar of firms of the
state in which any place of business of the
firm is situated.
Indian Partnership Act, 1932
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No suit can be filed in a civil court by firm
against third parties.
No suit can be filed a partner against the firm
or other copartners.
The firm or is partners cannot make a claim
of set-off or other proceedings based upon
the contract.
Indian Partnership Act, 1932
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PROCEDURE FOR REGISTRATION The
registration of a firm may be effected at any
time by sending by post or delivering to the
Registrar of 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 :
the firm name
Indian Partnership Act, 1932
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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;
Indian Partnership Act, 1932
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the names in full and permanent addresses of
the partners; and
the duration of the firm.
Indian Partnership Act, 1932
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The statement shall be signed by all the
partners or by their agents specially
authorised in this behalf. Each person signing
the statement shall also verify in the manner
prescribed.
Indian Partnership Act, 1932
26
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A firm name shall not contain any of the
following words viz. "Crown", ‘Emperor",
"Empress", "Empire", "Imperial", "King",
"Queen", "Royal", or words expressing or
implying the sanction, approval or patronage
of Government, except when the State
Government signifies its consent to the use of
such words as part of the firm name by order
in writing.
Indian Partnership Act, 1932
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All the States have framed rules prescribing
the forms, fee for registration and verification
of the statement. The application for
registration has to be made to the Registrar
of Firms in the prescribed form
Indian Partnership Act, 1932
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When the Registrar is satisfied that the
provisions have been complied with, he shall
record and entry of the statement in a
register called the Register of Firms and shall
file the statement. The Registrar is the
competent authority and if he acts bona fide
and follows the procedure, his satisfaction
cannot be challenged.
Indian Partnership Act, 1932
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CHECKLIST FOR DRAFTING A PARTNERSHIP
DEED
A partnership deed should contain the
following clauses
Name of the parties
Nature of business
Indian Partnership Act, 1932
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Duration of partnership
Name of the firm
Capital
Share of partners in profits and losses
Banking, Account firm
Books of account
Indian Partnership Act, 1932
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Powers of partners
Retirement and expulsion of partners
Death of partner
Dissolution of firm
Settlement of disputes
Indian Partnership Act, 1932
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(a) Dissolution of partnership – When one or
more partners cease to be partners of the
firm but others continue the business in
partnership may or may not involve the
dissolution of the firm.
(b) Dissolution of the firm – Dissolution of
partnership between all the partners of a firm
Indian Partnership Act, 1932
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By agreement
By notice
On happening of certain contingencies
◦ death of a partner
◦ Adjudication of the partners as insolvent
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Compulsory dissolution
Indian Partnership Act, 1932
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Dissolution by court
◦ Grounds
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Insanity of partner
Permanent incapacity of partners
Misconduct
Transfer of interest
Persistent breach of agreement
Continuous losses
Indian Partnership Act, 1932
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Continuing liability of partners after dissolution
Continuing authority of partners for winding up
Right of partners to enforce winding up
Liability to share personal profits
Return of premium
Rt where partnership contract is rescinded for
fraud
Right to impose restrictions
Indian Partnership Act, 1932
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Every partner or his representative is entitled
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(1) to have the firms property applied in
payment of the firm’s debts
(ii) to have the surplus distributed amongst
the partners or the representatives according
to their respective rights.
Indian Partnership Act, 1932
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Until a public notice of is given of dissolution,
the partners continue to be liable for any act
done by any of them after dissolution and any
such act is deemed to be an act done before
the dissolution.
Indian Partnership Act, 1932
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