PARTNERSHIP act 1932

Formation of the Act

The Indian Partnership Act, 1932is an act enacted by

theParliament of Indiato regulate partnership firms in
India. Before the enactment of this act, partnerships were
governed by the provisions of the Indian Contract Act 1872.
It received the assent of the Governor-General on 8 April
1932 and came into force on 1 October 1932. Except the
section 69 which came into effect on 1 October 1933.
The act is administered through theMinistry of Corporate
Affairs.
 PARTNERSHIP

Partnership is defined under Sec 4 of the Indian

partnership Act of 1932 as follows

A relation between persons who have agreed

to share the profits of business carried on by all
of them or any of them acting for all.
 Non-Applicability of the
Act

The act is not applicable to Limited Liability

Partnership, since they are governed by the
Limited Liability Partnership Act.
It is applicable throughout India except the
state of Jammu and Kashmir.
 formation of partnership

May be formed by oral or written agreement.

All essential of valid contract be present.
Mutual rights and obligation to be in Partnership
Deed.
The deed to be registered.
 ESSENTIAL ELEMENTS OF A
PARTNERSHIP
Agreement.
Association of two or more persons.
Sharing of profits.
Business.
Relation between partners.
 The following can enter
into a partnership

Individual.
Firm.
Hindu undivided family.
Company.
Trustees.
 PARTNERSHIP DEED

A partnership deed should contain the following

clause:-
Name of the parties.
Nature of business.
Duration of partnership.
Name of the firm.
Capital.
Share of partners in
profits and losses.
 Banking, Account firm.
Books of account.
Powers of partners.
Retirement and expulsion of partners.
Death of partner.
Dissolution of firm.
Settlement of disputes.
 Types of partners

ACTIVE PARTNER:- One who contributes capital,

participate in management & share profit & loss.
These partners take actual part in carrying of
business on behalf of other partners.
SLEEPING PARTNER:- Partners who do not take
part in the day to day activities of the business.
SECRET PARTNER:- He is the one whose
association with the firm is unknown to general
public.
PARTNER BY ESTOPPEL:- A person is
considered as partner by estoppel if
through his own initiative, conduct or
behavior , he gives an impression to others
that he/she is a partner of the firm.
NOMINAL PARTNER:- He is the one who
allows the use of his name & good
reputation by the firm.
MINOR AS A PARTNER:- Under Sec. 30
of the Indian Partnership Act 1932, a minor
can be admitted to the benefits of
partnership, with the consent of all the
partners.
PARTNERS IN PROFIT:- When a partner
agrees with others that he would only share
the profits of the firms and would not be
PROPERTIES OF DIFFERENT
PARTNERS
PARTNERS CAPITAL MANAGEMEN SHARE IN LIABILITY
CONTRIBUTIO T PROFIT/LOS
N S
ACTIVE CONTRIBUTES PARTICIPATE SHARES UNLIMITED
PARTNER CAPITAL S IN MGT P/L

SLEEPING CONTRIBUTES DOES NOT SHARES UNLIMITED

PARTNER CAPITAL PARTICIPATE P/L
S
SECRET CONTRIBUTES PARTICIPATE SHARES UNLIMITED
PARTNER CAPITAL S BT P/L
SECRETLY
NOMINAL NO CAPITAL DOES NOT DOES NOT UNLIMITED
PARTNER CONTRIBUTIO PARTICIPATE SHARES P/L
N S
 PARTNERS CAPITAL MANAGEME SHARES IN LIABILITY
CONTRIBUTI NT (MGT) PROFIT/LOSS
ON ES (P/L)

PARTNER BY NO CAPITAL DOES NOT DOES NO UNLIMITED

ESTOPPEL CONTRIBUTI PARTICIPATE SHARE P\L
ON S
MINOR AS A CONTRIBUTE DOES NOT SHARES LIMITED
PARTNER S CAPITAL PARTICIPATE PROFIT
S (UNLESS
ALL
PARTNERS
CONSENT)
PARTNERS IN CONTIBUTES PARTICIPATE SHARES NO LIABILITY
PROFIT IN MGT PROFIT
 REGISTRATION OF
FIRMS
Under the partnership Act, it is not compulsory
for every partnership firm to get itself registered.
An unregistered firm suffers from a number of
disabilities.
An application in the prescribed format along
with the prescribed fees has to be submitted to
the Registrar of firms of the State in which the
place of business of the firm is situated.
 Effects of
non-registration
No suit in civil court by a partner against the firm
or other partners.
No suit in a civil court by a firm against the
parties.
The firm or its partners cannot make a claim of
set-off or other proceeding based upon a contract.
 rights of the partner

To take part in the conduct of the business of the firm.

To be consulted.

Of access to accounts and books.

To share in the profits of the business.

To interest on capital only if there is an agreement.

To interest on advances at 6% p.a.

To have the use of partnership property for the purpose of the

business of the firm.

To retire.

Not to be expelled.

 Duties of a partner
To observe good faith.
Not to claim any remuneration.
To share losses.
To hold and use property of the for the firm.
To account for profits in competing business.
To account for personal profits.
To act within authority.
To be liable jointly.
 DIFFERENCE BETWEEN partnership AND JOINT
STOCK COMPANY

BASIS PARTNERSHIP JOINT STOCK

COMPANY
REGULATING LAW A partnership is A company is
created by created by
agreement which registration under
may be expressed or the Companies Act
implied from the 1956.
conduct of the
partners.
TRANSFER OF Can transfer his Shares are freely
SHARES shares in the firm, transferable unless
but the assignee the companies
doesnt there by constitution
become a partner. otherwise provides
restriction.
CREATION It is not legal though It is an artificial legal
it may sue and be person with
sued in the firms perpetual
 BASIS PARTNERSHIP JOINT STOCK
COMPANY
MEMBERSHIP Cannot consists of Must have at least 2
more than 20 members and
persons. maximum 50
members.
MANAGEMENT Partners are entitled Members cant take
to share in part in management
management unless unless they become
articles provide directors.
otherwise.
LIABILITY Is unlimited. Is limited.
DURATION Dissolved by any No one member can
partner at any time. wind up and death
Also dissolved by and bankruptcy or
death or bankruptcy insanity of member
of partner. does not mean that
company is
dissolved.
 DIFFERENCE Between
PARTNERSHIP AND JOINT
HINDU FAMILY FIRM
BASIS PARTNERSHIP JOINT HINDU FAMILY
FIRM
CREATION By agreement By operation of law.
voluntarily entered by
persons.
MEMBERSHIP No new members can Person becomes a
be admitted except member by his birth.
with consent of all
other members.
MINOR AS A MEMBER Cannot be a member Becomes a member
but be a beneficiary. by birth.

RIGHTS OF MEMBER Members have right to No rights to ask for

TO DEMAND demand , inspect and any accounts of the
ACCOUNTS copy any of the past dealings.
accounts.
 BASIS PARTNERSHIP JOINT HINDU
FAMILY FIRM

NUMBER OF Limited to 20 No restriction on

MEMBERS members. number of members.

REGISTRATION Is essential for the Need not be

maintenance of suits registered at all.
of both against
partners as well as
outsiders.
MODE OF Can be dissolved Can be dissolved by
DISSOLUTION voluntarily , the partition of the
compulsorily or by family.
order of court under
different
circumstances.
 reconstitution of a firm

Introduction of a partner (sec 31).

Retirement of a partner (sec 32).
Expulsion of partner (sec 33).
Insolvency of a partner (sec 34).
Death of a partner (sec 35).
Transfer of a partners share (sec 29).
 Dissolution of the firm
It means complete breakdown of the relationship
of partnership between all the partners of the
firm. If this breakdown or severance of
partnership relation between a few and not all
the partners, this amount to dissolution of
partnership and not of the firm.
 dissolution of partnership

Dissolution of partnership is different from the dissolution

of firm. When any of the partners dies, retires or become
insolvent but if the remaining partners still agree to
continue the business of the partnership firm, then it is
dissolution of partnership not the dissolution of firm.
Dissolution of partnership changes the mutual relations
of the partners.
But in case of dissolution of firm, all the relations and the
business of the firm comes to an end.
 Dissolution without the
order of the court
Dissolution by agreement(sec.40)
a. With the consent of all the partner , or
b. In accordance with a contract between
them.

Compulsory dissolution(sec.41)

a. When all the partner or all the partners

but one
are adjudicated insolvent.
b. On the happening of any unlawful
events.
 Dissolution on happening of certain
contingencies (sec. 42)
a. expiry of term.
b. completion of the particular adventure.
c. the death of partner.
d. The adjudication of a partner as an
insolvent.

Dissolution by notice of partnership-at-will

(sec. 43).
 dissolution by the
court(sec.44)

Insanity.
Permanent incapacity.
Misconduct.
Persistent breach of agreement.
Transfer of interest.
Business working at a loss.
 rights of a partner on
dissolution
Right to have business windup(sec.46).
Right to have the debt of the firm settled out of the
property of the firm(sec.49).
Right to personal profit earned after dissolution (sec.50).
Right to return of premium on premature
dissolution(sec.51).
Right where partnership contract is rescinded for fraud
or misrepresentation(sec.52).
Right to restrain partners from use of firm name or
property(sec 53).
 RETIREMENT of the
partner
A Partner may retire under Sec 32 by:-
1. With the consent of all the other partners.
2.According to the expressed agreement by
partners.
3.By giving notice in writing to all the
partners,
regarding his intentions to retire.[SEC
32(1)].
 Death of the partner
Section 42(c) of the Partnership Act If one of
them dies, the firm is dissolved; but if there is
a contract to the contrary, the surviving
partners will continue the firm.
Therefore, there is no scope for applying
clause (c) of sec. 42 to such a situation.It may
be that pursuant to the wishes of the
directions of the deceased partner the
surviving partner may enter into a new
partnership with the heir of the deceased
partner, but that would constitute a new
partnership.
 Liabilities of partners to
third parties
Liability of a partner for acts of the firm: Liable
jointly and severally.
Liability of firm for wrongful act of partner: Firm
liable to third party for loss caused by partner
,the same will be borne by the partner who
committed the fraud and not shared by the
partners.
Liability of firm for misapplication by partners: If
partner misappropriates received in repayment
on account of the firm, 3rd party can make the
firm liable for it.
 Public notice
On the retirement or expulsion of a
partner from a registered firm.
On the dissolution of a registered
firm.
On the election to become or not
to become a partner in a
registered firm by a minor on his
attaining majority.
THANK YOU
PREPARED BY:
Harshna Bazari
Jayanta Handique
Jayanth BL
Khusbu Prasad
Kishore Kumar Singh
Kushal Mundra
Manoj Kumar CV
Md. Sanobar Siddiqui