Assignment ON The Indian Partnership Act, 1932 by Neha Sachdeva ROLL NO. - A3256119078 Submitted To: Mr. Annirudh Vashishtha
Assignment ON The Indian Partnership Act, 1932 by Neha Sachdeva ROLL NO. - A3256119078 Submitted To: Mr. Annirudh Vashishtha
Assignment ON The Indian Partnership Act, 1932 by Neha Sachdeva ROLL NO. - A3256119078 Submitted To: Mr. Annirudh Vashishtha
ON
THE INDIAN PARTNERSHIP ACT, 1932
BY NEHA SACHDEVA
ROLL NO. – A3256119078
SUBMITTED TO: MR. ANNIRUDH
VASHISHTHA
The Indian Partnership Act , 1932
INTRODUCTION
There are certain limitations of a sole trader. In a sole trading concern
only one man invests capital, undertakes the risk involves in the business
and controls the whole affairs of the business. But one man’s capital,
skill, controlling and risk taking capacity are generally limited.
Therefore, some person may combine and enter into an agreement to
form a partnership.
Partnership is a relation a mutual trust and faith. In order to maintain this
trust, it is necessary that the partnership accounts be maintained in an
honest, accurate and equitable manner. Partnership accounts should
present a true and fair picture of the partnership business. For the
purpose it is necessary to study the definition of partnership as given in
the Partnership Act and the relevant provisions of the Partnership Act
which affect the partnership accounts.
of the partners.
How the share in a partnership is transferred and what shall be the
rights and obligations of such
transferee.
parties.
The consequences and the effects of the dissolution upon rights and
liabilities of various parties.
ELEMENTS OF PARTNERSHIP
DUTIES OF PARTNERS
All the duties of partners emerge from the second principle i.e. the
relation of partners to one another is of utmost good faith. Following are
the duties of partners:
Section 9 of the act provides that it is the duty of partners to act for the
greatest common advantage of the firm. Therefore, the partner should
work to secure maximum profits for the firm. A partner should not
secure secret profits at the expense of the firm. In Bentley v. Craven,
there was a partnership in a sugar refinery firm. One of the partners was
skilled in buying and selling sugar. Therefore, he was entrusted with the
task of buying and selling sugar. However, the partner sold the sugar
from his own stock and thus, gained profit. When the partners
discovered this fact, they brought an action to recover profits earned by
the partner. It was held by the court that the partner cannot make secret
profits and therefore, the firm was held entitled for profits earned by the
partner. The duty continues to exist even after the partnership has ceased
to exist. The partners owe the duty to legal representatives of the partner
as well as the former partner.
Section 16(b) of the act provides that if the partner makes a profit by
engaging in a business which is similar to or competing with the firm,
then the partner should account for such profits. In Pullin Bihari Roy v.
Mahendra Chandra Ghosal, there was a partnership for buying and
selling of the salt. One of the partners while buying the salt for the firm,
bought some quantity of salt for himself and then gained profit by
selling it on his personal account. He was held to be liable to account to
his co-partners for the profits earned. However, a partner can carry on
any business which is outside the scope of the business of the firm. The
duty can be altered by the partnership deed. The partners may enter into
an agreement which allows a partner to carry the business competing
with the business or can restrict the partner from carrying any business
other than that of the firm. Section 11 provides that such an agreement
will be valid and cannot be considered as a restraint in trade. If a person
breaches such agreement and carries on a personal business which not
competing to the business of the firm then such a partner will not be
liable to account for the profits, but his co-partners can apply for
dissolution of the partnership.
3) Duty to be Diligent
Section 9 of the Act, provides that the partners are bound to disclose and
provide full information about the things that affect the firm to any
partner or his legal representatives. This means that a partner should not
conceal things from other co-partners in relation to the business of the
firm. Every partner has the right to access the accounts of the firm.
In Law v. Law, it was held by the court that if a partner is in possession
of some extra information then he is bound to deliver it to the co-
partners. If the partner enters into a contract with other co-partners
without furnishing them the material details which is known to him but
not his co-partners then such a contract is voidable.
Section 15 of the act, provides that property of the firm should be held
and used by the firm only for the business of the firm. A partner cannot
make use of the property for his personal purpose and if does so, then he
will be accountable to all the co-partners. He could be made liable for
the losses caused because of any such use. This duty can be avoided by
entering into an agreement to the contrary.
7) Duty to account for personal profits
Section 16 of the Partnership Act, provides that: If a partner makes the
use of the property of the firm and earns profit out of it, then he should
account for the property. This duty arises because of the fiduciary
relationship between the partners. Illustration: A, B, and C were
partners in a firm. Goods were supplied to a person D. D paid some
extra commission to A, for using his influence to deliver the goods to D.
Here, A has the duty towards the co-partners to account for the
commission. If a partner enters into a business which is competing with
the business of the firm then the partner should account for the profit
earned from any such business. Illustration: A, B, and C were partners
in the business of sale of bottles. B started to carry on the same business
and started to influence the customers to buy the bottle from him rather
than the firm. Here, B has a duty to account for the profits earned from
the business. However, a competing business can be carried out after the
dissolution of the partnership. The firm has the right to put reasonable
restrictions on carrying the competing business by the ex-partners such
as, any reasonable time for which the ex-partners can’t carry the
competing business or the geographical limits where he can’t carry the
business. This is not a compulsory duty and thus, can be avoided by
entering into an agreement to the contrary
RIGHT OF PARTNERS
Section 12(a) of the act, provides that every partner has a right to take
part in the conduct to the business of the firm. This right can be curtailed
by the provisions of the agreement. Thus, allowing only a few partners
to actively participate in the functioning of the business. This right
should be used by the partners for promoting the business of the firm
and not for damaging the business. In Suresh Kumar Sanghi v. Amrit
Kumar Sanghi, a partner in order to undermine the position of the
managing partner wrote to the principals to not supply motor vehicles to
the firm and to the banker’s to not to honour the cheques of the firm.
The Delhi High Court provided an injunction against the partner saying
that the partner’s act was to damage the business of the firm.
2) Right to be consulted
Section 12(d) of the act, provides the right to partners to access, inspect
and copy account books. A partner can exercise this right by himself or
by his agent but none of them is authorized to use the gained information
against the interest of the firm. Example: If a dormant partner wants to
sell his shares to a co-partner and appoints an expert to inspect the
account and his share in the firm then, co-partners cannot object to same.
For raising an objection the co-partners should provide reasonable
grounds such as protection of trade.
4) Right to be Indemnified
Section 13(b) of the Indian Partnership Act, provides that the partners
are entitled to share the profits and losses equally. Right to share profits
is not affected by the fact that the partners have contributed unequally in
the firm, possess different skills, have labored unequally in the firm.
In Mansha Ram v. Tej Bhan, where there was no satisfactory evidence
to show that in what proportion the partners were to divide the
remuneration. It was held by the Punjab and Haryana High Court that
the partners were entitled to share equal profits irrespective of the fact
that they had been paid separately and had done unequal work.
However, the right to share profits equally can be altered by the partners
by entering into an agreement to the contrary. Thus, the partners can fix
the share of profits or agree to be paid by way of salary rather than
profits.
6) Right to Interest
7) Right to remuneration
Before going into rights and duties, we should first know how a change
may take place in the constitutionof the firm. It may occur in one of the
four ways, namely,
retirement