II YEAR I SEMESTER B.A.LL.B. (HONS.

) DEGREE

Law of contract II

“Partnership and Cartel“

SUBMITTED TO:-
Mr.CV Shereeram
Assistance Professor,
Tamil Nadu National Law School
Trichy

SUBMITTED BY:-
Abhisek Dash
 DECLARATION

I, Abhisek Dash do hereby declare that the research project entitled “Cartels and partnerships”
submitted to the Tamil Nadu National Law University; Tiruchchirappalli, is a record of bona-fide
and independent work done by me under the supervision and guidance of Mr.CV Shreeram.,
Faculty of Law(Contracts-I), Tamil Nadu National Law University; Tiruchchirappalli. All
information furnished in the project for scrutiny is true to the best of my knowledge and belief
devoid of plagiarism. If plagiarism under the circumstances is truly established, the Law School
may be pleased to proceed with any action against me according to the University’s rules and
regulations.
 CERTIFICATE

This is to certify that the research project entitled “Cartels and partnerships” submitted to the Tamil
Nadu National Law School; Tiruchchirappalli, in fulfillment of the requirements for internal
component for B.A; LL.B (HONS.) in Contracts--- II, Third Semester, is an authentic and bona-
fide research work carried out by Abhisek Dash under my supervision and guidance. No part of
this study has been submitted to any University for the award of any Degree or Diploma
whatsoever.

Mr. (CV Shreeram)

Date: /10/2018
Place: Tiruchchirappalli.
 ACKNOWLEDGEMENTS

At this juncture, a long list of acknowledgements should obviously follow after the successful
completion of my herculean project and as a student it is my profound duty to duly acknowledge
the co-operation of many persons without whose unwavering support and conviction, it would
have become highly impossible for me to accomplish this endeavor within a short span of time.
Though I feel elated by the fact this project has taken its present shape due to the involvement and
dedication of many persons in the background who have contributed immensely towards this
project but listing all of them and thanking them individually seems to be absurd. In return, they
all have my sincere thanks and heartfelt gratitude for their unforgettable commendable
contributions. The literature of the cartels and partnerships initially wasn’t easy for me to digest. I
read and re-read the Act many times for my own understanding before deciding to write the own
script for my project. Firstly, I fervently thank my faculty who has been of invaluable help towards
this project. Despite his hectic schedule round the clock (even couldn’t spare time during
weekends), he stood as a backbone especially revising the initial script of my project by suggesting
and guiding me constantly during critical stages of the project. I am, forever, indebted to him as a
student. I am indebted to my parents for their unfettering support and loyalty which rejuvenated
me when my energy faded during critical stages of the project.
 Table of Contents

Partnerships an Brief overview

Definition and Nature Of partnership

Essentials of partnership

Rights of partner

Duties of partners

Cartels: An Brief overview

Conclusion
An overview of partnership Act-

Prior to 1932, the law of Partnership were in Chapter XI of The Indian Contract Act. But these
provisions were not coherent and due to development of trade and commerce, these provisions
were inconsistent as it was entirely made up on principles of common law and precedents. Apart
from this Contract Act was enacted fifty years ago which was dormant to deal in the cases of
partners. The ambiguity in these sections 1 of the Act led to emergence of a new Act called The
Indian Partnership Act, 19321. The Indian Partnership Act was enacted in the year 1932 and it
came in to effect on 1st day of October 1932.On the motion to draft the Partnership Act, the drafters
completely focused upon the “The Partnership Act, 1890” was enacted and was successful
legislation in England and the common law countries too had adopted the same. The short-comings
of this Act adopted in England were taken down and to avoid these difficulties were made to the
Indian version of the Act. The Indian Partnership Act is a pre-constitutional Right 4 which has
been enshrined in the Constitution of India under Article 19(1) c. 2 The Partnership Act, 1932
superseded the earlier law relating to partnership. The object of this Act was to handle the
controversy of partnership through a piece of legislation over-riding the earlier laws. It has also
been noted in Section 3 and 5 of the partnership Act, 1932 mentions the application of provisions
of Act IX of 1872.It mentions how the law of partnership is to be handled. The rules relating to
contract such as consideration, free consent, legality of object etc. shall be applying to this
enactment.

NATURE OF PARTERNERSHIP

It is a form of business where 2 or more than 2 person carry out the business voluntarily. 3.It is
reciprocal to “sole trade business”, with the personal resources and material. The partnership
happens in a business when two or more than two person joint invest in the business and they get
the profit as per the proportionate of their investment. If the business bear the loss they have to

1
Commentary of Bangia on the “chattel the overview”, 2001
2
SK Saroj, Partnership and Chattel ,2013, page 9,
3
The Partnership Act, 1937
bear the loss at the ratio of their investment.4 The Partnership act is salient on what the maximum
number of the person can be in the partnership. But it imposes s some limitation. It is business in
the sphere or preview then the total person should be 10.but it is a non-banking business the
maximum bar is 20.it is exceeding it should a registered company. Under the company act, 1956.

ESSENTIAL OF PARTERNSHIP

1. There should be an agreement between the partners.5

An agreement is the least and utmost requirement for a partnership, it may be expressed or implied.
The agreement creates a legally binding relation between the partners. If the agreement is created
limpidly the partners can’t come under the preview of partnership act.6 The agreement of
partnership should arises out of contract not a mere status. This has been illustrated in the case of
Rashiklal & co. v. I.T Commissioner “The apex court had said that “An H.U.F directly or
indirectly cannot become a partner of a firm because the firm is an association of individuals. A
body of persons could not enter in to partnership with other individuals. An H.U.F cannot be a
better position than a partnership firm”.7

2. The purpose of creating partnership should be carrying on of business

The sole objective of the partnership is to carry out business and share the profit among its partners.
It does not includes which is illegal or agnist the public policy of the country, if such transition
happens it would be void .the business should carried by all the partner or one acting for all the
partners. This term is called “carrying on of a business.”8 In the land mark case K.Jaggaiah
v.Kokumanu the apex court decided that a person can be partner of a firm through another person
through the undertaking.9

3. The motive for creation of partnership should be earning and sharing profits.

4
Avtar Shing , Lectures of , the Partnership Act ,1937
5
The Parternship Act,1937
6
Sarsmita Swaini v Rajat Kumar Mohanty, 1989
7
Rashikalal v IT Commissioner
8
Rajiv bhatnaga v Sredheswari Mongia
9
K. jaggaaiah v Kokumanu,
The sole motive of the partnership is to earn profit and distribute it among the partners. The intent
of the partners should be invest and earn profit. A club which intention and sole objective is not to
invest and to earn profit running for a welfare purpose can’t be called partners as per the
partnership act. The financial benefit of profit happens when the returns from the business exceed
the investment. In the case shitakanta jain v harish singh the apex the supreme court decided
that the long term the motive of the partners to earn profit should be there while at short term they
may be agreed to incur loss. The short term plan was to capture the market where they will be
benefited latter part of their business.10 Grace v. Smith 11, Grey C.J Stated that ‘Every man who
has the share of the profits of a trade ought to also bear his share of the losses.

The section 6 of the partnership act of the act says that the real relation between the party should
be seen through determine the existence the existence of the partnership. There are four type of the
relationship where the profit does not get share.

They are as follows-

(I)Money-lender sharing the profits,

(ii)The servant or the agent,

(iii)The widow or child of the deceased partner, and

(IV) The seller of goodwill.

Money-lender sharing the profits

The person who lends money for a particular purpose does not make him a partners under
partnership act. He can’t held liable under the partnership act. 12A Hindu raja gave an amount of
money to firm to start the business, he waited for the revenue of the firm to get it back including
his capital so here he can’t be held liable under the partnership act and also made liable for the loss
of the parties.13

Servant or agent sharing the profits-

10
Shitkant Jain v Harsh Singh, AIR 1999
11
Grace v Smith, 1971
12
Veshpare Grace v Reobert Doweney, SCC 2003
13
Mahalaxmi Samantray v R Addhikari, 1979
In some instance a master pay the salary of the servant through the profit, so it can’t called the
partners under the partnership act, 1956.14 A broker was paid from the profit including the salaries,
he signed various necessary document of the company latter it was decide that he is not the partners
of the firm.15

Widow or child of a deceased partner sharing profits-

When the partner will die, the part of his profit will be given to his legal nominee but the legal
nomine like widow can’t be partners.to being the partner legal agreement necessaries should be
finished16

Seller of goodwill sharing the profits-

A person can share it profit out of good gesture but the beneficiaries can’t be called partners as per
the partnership act, 1956.

Chapter II

RIGHTS AND DUTIES OF THE PARTENERS

This chapters deals with rights and duties of the partners, this chapter deals with that i.e. sec 9 to
17.a very and general rule is that the right and duties which is decided by their agreement. The
contract may decide the investment of the firms and share the profit according to it. This also can
be further changed with wish of the partners.17 This mutual agreement may be express or impled.it
has been described in the sec 27 of the Indian contract, 1872.

1. Right to take part in the conduct of business

It describes the right of the every partner to conduct and participate. The partners have the right to
express their views in the conduct of the business. If this right is curtailed the partners can move
to the court agnist the person who violates this very essential right of the partners.18

14
Ramwshwar Orano v Karthiki Gaudd, SC 1980
15
Sandeep Shani v Sangram Mishra AIR 2001
16
Mahasangran Samntray v Ram Naresh Aggrawal, SCC2014
17
Govinda Mishra “llan” v Vijay Sing Maurya,AIR 2000
18
Anshir Sekh v Ragu bhai Patel
 2. Right to express opinion

Sec 12c expressly says about the right to the partners to express their opinion freely. No extra
remuneration should be given to any of the partners, this unjust enrichment will violates the
basic right of the partners act but also the principle of natural justice19

3. Right to have access to books of the firm

It has been described in the section 12 d of the partnership act, this gives the right for the access
to all the book and account maintained in the firm. The word book also includes all the account
and everything the distal formant and electronic data20. This can be exercised by the partners
or the agent of the partner’s s. But e subagent will not be allowed in to it.

4. Right to share profits

The partners are entitled to share their profit with their agreement, in the absence of any
agreement it is based on the proportionate of their investment. The agreement may be
expressed or implied21.

5. Right to interest on capital and advancesIt is a normal condition the partners what haven
invested initial known as capital investment will get interest for it.it is agreed by all the partners
regarding the interest, this is stated in section 13(c) . .when the firm is incurring losses then the
partners can pump money into firm where he can get 6 percentage interest out of it.

6. Right to Indemnity

A partner has a right to get indemnified for the acts on and behalf of the firm. The act should in
the ordinary and proper conduct of the business and also for doing some act in emergency for the
purpose of protecting the firm from the losses. This has been mentioned section 13(e) .

19
Shyam Mudgal v Rameshari HikkokaSC 2009
20
Alokanna Rao v Shelatha Chhuria,,SCC 1997
21
R.Madhav v Jathin Seth, AIR 2013
Duties of Partners

Partners when they get their rights, they have their duties towards the firm. It is given in the
Partnership Act, 1932 in section 9& 10 which specifically deals which are not subject to
contract between the partners, whereas certain duties have been provided from section 12 to
17,each one of those provisions has been made ‘subject to contract between the partners’. Section
9 has mentioned the duties which is as follows-

The duties as contained in the provisions are

1. To carry on the business to the greatest common advantage,

2. To be just faithful to each other,

3. To render true accounts, and

4. To render full information of all the things affecting the firm22.

1. Duties to carry on the business to the greatest common advantage.

Partnership is totally based on trust among the partners. Partners have a duty no to make any secret
profit out of the firms money, if they do so they should return that money to the firms account.
This is illustrated in section 9 and is read with section 16(a) of the Act. 43

2. Duty to be Just and fruitful to each other

As the mutual agency exists between the partners, every partner is expected to be just truth and
fruitful to each other is another duty under section 9. Sec. 33 provides that even if the contract
between the partners authorized the expulsion of the partner must be exercised in good faith23. If
the faith amongst the partner is not present, then court may order for dissolution of the firm.

3. Duty to render true accounts

22
Shankardeep singh v Munmun kuar, SCC 1978
23
Hema Shri Gautam v Brajonath gaungly AIR 1991
Another important duty of the partner is to render true accounts to his co-partners, because every
Partner has a right to inspect and access the accounts of the firm.24

4. Duty to render full information of all things affecting the firm.

Every partner has a duty to render full information to the firm. Concealment of facts by a partner
renders him liable to others. Thus, if a partner having full knowledge of material facts with regard
to the partnership assets purchases the share of a co-partner without making full disclosure of the
facts to the other, the contract is voidable.

5. Duty to indemnify for fraud

The firm is liable not only for the contract made by them on behalf of other but also for wrongful
act or omission of a partner commits a fraud against a third party while acting in the ordinary
course of business of the firm, the third party can make the firm liable for the same.

6. Duty to be diligent

The partner is bound to attend his duties diligently in the conduct of business of the firm, and use
the property of the properly. The property has to be exclusively used only for the business of the
firm. A partner is supposed to devote himself solely to the business of the firm. He should not
carry on a competing business. If a partner carries on any business of the same nature as and
competing with that of the firm, he shall account for and pay to the firm all profits made in the
competing business.

Chapter III

24
Govinda Badejena v JB Pattnaik , SC 1999
 Cartels

Brief overview

In 1990s, there were about 30 countries with a competition law. At present there are over 100
countries in various stages of enactment of competition law. Competition laws across the world
differ in various aspects; however, as said, there is one feature that unites them i.e. condemning
cartel agreements. Cartels are the most egregious of all competition law violations. They are most
prevalent in markets for consumer goods or inputs and services essential to other sectors of the
economy. 90 years of the last century, in particular, saw a global resurgence of international cartels,
which was evident thanks to the numerous efforts to uncover them by competition authorities. It
is believed that, the US and EU authorities have prosecuted about 100 international cartels during
this period. The experience in dealing with cartels in India so far has not been quite satisfactory
under the MRTP Act 1969. Nevertheless, it would be relevant to study the strengths of the Indian
Competition Act, 2002 with reference to the cases that were brought under the MRTP Act as well
as study the experience of enforcement in select jurisdiction such as USA and Brazil, to derive
operational guidelines for the Competition Commission of India (hereinafter referred to as “CCI”).
However, the Competition Act, together with its subsequent Amendment Bill, 2006, has made
strident progress as compared to the old Act, in areas such as: institutionalized and clear definition
of cartels, wider power and better tools to CCI to investigate and prosecute cartels (leniency,
penalties, interim relief, etc.).The Competition Act 2002 increases the possibility of dealing
successfully with cartels.

The Competition Act, 2002 (the Act) prohibits any agreement which causes, or is likely to cause,
appreciable adverse effect on competition in markets in India. Any such agreement is void. Cartels
are agreements between enterprises 49 (including association of enterprises) not to compete on
price, product (including goods and services) or customers. The objective of a cartel is to raise
price above competitive levels, resulting in injury to consumers and to the economy. For the
consumers, cartelization results in higher prices, poor quality and less or no choice. A cartel is said
to exist when two or more enterprises enter into an explicit or implicit agreement to fix prices, to
limit production and supply, to allocate market share or sales quotas, or to engage in collusive
bidding or bid-rigging in one or more markets.

Conclusion-Cartels a subset of Partnership

Cartels and partnership are two different concepts. Both of them are not inter-linked with each
other and far away in their application. This can be connoted in a sense as cartels is a subset of
partners. Partnership is a form of business where two or more persons join together for jointly
carrying on some business. It is the reciprocal of “sole trade business” in which a single person
carries out his business with the help of resources he possess. The partnership arises when two or
more jointly invest and get their profits according to the shares invested by them. Partners can
jointly amalgamate their resources and could start a large business. The Act is silent on the concern
of “maximum number of persons in a partnership firm”, whereas "Cartel" includes an
association of producers, sellers , distributors, traders or service providers who, by agreement
amongst themselves, limit, control or attempt to control the production, distribution, sale or price
of, or, trade in goods or provision of services. No, doubt these days a common term has been
introduced called cartels and partners, but they cannot form a cartel, but when one of the partner
on behalf of the firm deals with certain anti-competitive activities such as price fixing, market
sharing, bid rigging and output restricting with other firms these would come under the purview
of cartelization and they are liable under the anti-trust law of the land i.e. Competition Act, 2002.So
it can be connoted that cartels is an subset of partners as an act of a partner representing on behalf
of the partnership engaging in anti-competitive agreements leading to cartelization.

BIBILOGRAPHY
LIST OF BOOKS

1. The Responsibility Revolution: How the Next Generation of Businesses Will Win by Jeffrey
Hollender and Bill Breen with Foreword by Peter Senge(Jossey Bass, 2010)

2. The Indian Partnership Act,Pollock and mulla,revised by Justice G,C Bharuka,&7the

3. The Indian Partnership Act, 1932 (With State Amendments & Model Partnership Deeds)

(Latest Bare Act), Universal Law Publishing and co.

4. The Indian Partnership Act (Universal Law Series) by Himanshi Mittal

5. The Indian Partnership Act - Commentary, by s.m lahiri,3 rd. edition, 2005

6. The Indian Partnership Act, 1932 with Limited Liability Partnership Act, 2008, by R.k

Bhangia,

7. COMPETITION Act, 2002 (Student Edition), ByDr. V.K Aggarwal

8. Guide to Competition Law in India (Competition Act, 2002), Universal law publishing and

co., 2003

9. Competition Law of India by Dr. Jai S. Singhi

10. The Competition Act, 2002 (Latest Bare Act) Private publication

11. Competition Law in India, By S.M Duggar