1. Indian Partnership Act 1932

2. Definition
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

3. Essentials 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

4. Duration of Partnership
Partnership at will – No provision regarding duration of partnership
Particular partnership – Partnership formed for a specific venture
Indian Partnership Act, 1932

5. Kinds of Partners 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

6. Minor as a partner 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

7. Not personally liable to third parties for the debts of the firm
Rights and liabilites of a minor admitted to the benefits of partnership
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

8. Contd -
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

9. Contd - 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

10. Rights of partners Rt To take part in the conduct of the business
Rt To be consulted
Rt to Access the books of accounts
Rt to Share in the profits
Rt to Interest on capital
Rt to Interest on advances
Rt to indemnity
Indian Partnership Act, 1932

11. Duties 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

12. Contd - Qualified duties Duty to attend diligently to his duties
Duty to work without remuneration
Duty to contribute to the losses
Duty to indemnify for willful neglect
Duty to use firm’s property exclusively for the firm
Duty to account for personal profits derived
Duty not to compete with the business of the firm
Indian Partnership Act, 1932

13. Doctrine of implied authority
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

14. Contd - 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

15. Contd - Acts within the implied authority
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

16. Contd - 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

17. Implied authority and third parties
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

18. Contd -
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

19. Contd -
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

20. Contd -
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

21. Registration of the firm
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

22. Effects of non registration
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

23. 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

24. 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

25. the names in full and permanent addresses of the partners; and
the duration of the firm.
Indian Partnership Act, 1932

26. 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

27. A firm name shall not contain any of the following words viz
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

28. 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

29. 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

30. 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

31. 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

32. Retirement and expulsion of partners Death of partner
Powers of partners
Retirement and expulsion of partners
Death of partner
Dissolution of firm
Settlement of disputes
Indian Partnership Act, 1932

33. Dissolution of a partnership firm
(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

34. Modes of dissolution of the firm
By agreement
By notice
On happening of certain contingencies
death of a partner
Adjudication of the partners as insolvent
Compulsory dissolution
Indian Partnership Act, 1932

35. Contd - Dissolution by court Grounds Insanity of partner
Permanent incapacity of partners
Misconduct
Transfer of interest
Persistent breach of agreement
Continuous losses
Indian Partnership Act, 1932

36. Consequences of dissolution
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

37. Rights of partners on dissolution
Every partner or his representative is entitled –
(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

38. Liabilities of a partner on dissolution
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