Contents

The INDIAN PARTNERSHIP ACT, 1932

CHAPTER I

NATURE AND DEFINITIONS

Historical Background

1

CHAPTER II

DEFINITION OF PARTNERSHIP

Q.

What is the meaning of the partnership according to section 4 of Partnership Act, 1932? State with Examples.

3

Partners, Firm, Firm Name – Section 4

3

Essentials of Partnership

4

Q.

What are the essentials to constitute partnership firm? Explain with relevant examples and cas laws.

4

A.

Agreement

4

Persons Capable of becoming Partners

6

H.U.F as a Partner

6

Q.

What in the status of H.U.F. under Partnership Act?

6

Joint Venture Agreements

6

Company as Partner

7

Section 5—Partnership not created by status

7

Q.

Whether a company can be formed by status?

7

B.

Business

7

Q.

What is the meaning of Business and what activities are included in the term ‘Business ’?

7

C.

Sharing of Profits

9

Q.

Sharing of profit is an essential element of the partnership firm. Discuss it

9

D.

Mutual Agency

10

Q.

Discuss the principle laid down in Cox v. Hickman.

10

Number of Persons

11

Whether a Firm a Legal Entity

11

Q.

Partnership firm is not a distinct legal entity what are the reasons.

11

Kinds of Partners

11

Q.

Discuss the various types of partners in the partnership firm.

12

Partnership and Company Distinguished

12

Q.

Discuss the features which distinguish partnership and company.

12

Partnership and Co-owners Distinguished

14

Q.

Distinguish the partnership firm with co-owners.

14

Partnership and Joint Family Distinguished

15

Q.

Define the features which distinguish partnership from joint family.

15

Partnership and Service Distinguished

16

Q.

What is the difference between partnership and service?

16

Partnership and Trade Association Distinguished

16

Section 6: Mode of Determining Existence of Partnership

16

Q.

What are the modes which determine the existence of partnership explain with the help of case laws and examples?

16

Q.

Whether sharing of losses is included in the sharing of profits?

18

Q.

What is the status of person in the partnership firm who lends money to firm?

18

Section 7: Partnership at Will

21

Q.

In which situations, a partnership is at Will. What are the essentials. Prove them with case law

21

Section 8 Particular Partnership

22

Q.

Define particular partnership.

22

Duration of Partnership

23

Meaning & Nature of Firm

23

Firm Name

24

Partner in a Representative Capacity

24

Partnership Firm as a Tenderer

24

Status of Partnership Firm under the Tax Laws

25

Q.

Discuss the status of firm under the taxing statute.

25

Suits against Partnership Firm

25

Illegal partnership

25

Q.

What are the grounds with which a partnership firm is presumed to be illegal?

25

CHAPTER III

RELATION OF PARTNERs TO ONE ANOTHER

(Sections 9-17 and Section 25)

26

“Duties of Partner”

27

1

General Duties of Partners – Section 9

27

Q.

Discuss in brief the duties of the partner.

27

Q.

What are the general duties of partners defined in section 9?

27

2

Duty to Indemnify for loss caused by fraud – Section 10

28

3

Determination of Rights and Duties of Partners by Contract between  the Partners – Section 11

28

Q.

By whom, the mutual right and duties are determined.

28

Q.

Explain the principle defined in Pabitra Construction Co. case.

29

Q.

Discuss critically agreement in restraint of trade what are the duties of partners while conducting the business of the firm.

30

4

Duty Relating to Conduct of Business – Section 12(b)

31

5

Duty to indemnify the firm for any loss caused to it by his wilful conduct – Section 13(f)

31

6

Duty in respect of personal profits earned by partners – Section 16(a)

32

Q.

What is the remedy given to partners if personal profit is earned by anyone of  the partners? Discuss with the help of case-laws.

34

7

Duty not to compete with the business of the firm – Section 16(b) of Partnership Act provides

34

8

Duty in respect of Application of the Property of the Firm according to Section 15

35

9

Duty to contribute equally to the losses – Section 13(b)

35

10

Duty to properly use of firm’s property – Sections 14, 15

35

Q.

Discuss the obligation of a partner if he uses firm’s property for personal use.

35

Rights of Partners

36

Q.

Discuss in brief the rights of the partners in the firm.

36

1

Right to take part in business – Section 12(a)

36

2

Majority Rights – Section 12(c)

37

Q.

When there is a need to take the majority decisions?

37

Q.

What is the principle laid down in case Const v. Haris?

37

3

Right to have access to books of the firm – Section 12(d)

37

4

Right to profits – Section 13(b)

38

Q.

Explain the maxim actus curiae neminem gravabit

39

Applicability of the Doctrine of actus curiae neminem gravabit

39

5

Right to receive interest on the capital subscribed

39

6

Right to indemnity in respect of payment made and liabilities incurred – Section 13(e)

39

Q.

Whether a partner shall be indemnified in respect of payment made or liabilities incurred by him.

40

Q.

What are the facts of the case Thomas v. Atherton.

40

7

Right to receive remuneration

40

Q.

Discuss the right of a partner to receive remuneration.

40

8

Majority Rights – Section 12(c)

41

Effect of change in the firm or its business – Section 17

41

Section 17 – Subject to Contract between the Partners

41

Q.

Discuss in brief the changes in the firm and effects thereof.

41

 

Problems

42

Q.

What are the rights and duties of partners after change in the constitution of firm.

42

Where Business Continued by Surviving Partners

42

Q.

In what circumstances a business can be continued by surviving partners.

42

Partnership Property

43

Q.

Define partnership property with the help of relevant case laws.

43

Section 14 – Property of the Firm

43

Q.

Define the three types of partnership property as per section 14.

45

Q.

Discuss the facts of the case law Broadway Centre v. Gopaldas Bagri.

47

Test for determining whether a particular property is separate property of the partner

48

Q.

What is the test to determine separate property.

48

Q.

Define the facts of Burnell v. Hunt.

49

Test to Distinguish Separate Property from Partnership Property

49

Section 25 Liability of a Partner for Acts of the Firm

49

Q.

What liability is defined under section 25.

49

CHAPTER IV

RELATIONS OF PARTNERS TO THIRD PARTIES

Section 18: Partner to be Agent of the Firm

50

Q.

Whether a partner is agent of the firm or not.

50

Section 25: Liability of a Partner for Acts of the Firm

51

Q.

Define the joint and several liability of partners.

51

According to section 25

52

Section 19: Implied Authority of Partner as Agent of the Firm

53

Q.

Define the implied authority of partner of the firm.

53

Q.

Define the case-law in relevancy with the section 26.

54

Section 22: Mode of doing act to bind firm

56

Q.

What are the modes which bind the partnership firm.

56

Section 20: Extension and Restriction of Partner’s Implied Authority

57

Q.

To what extent there is a restriction on partner’s implied authority.

57

Section 21: Partner’s Authority in an Emergency

58

Section 23: Admission made by a Partner

59

Q.

What is the effect if an admission is made by partner?

59

Section 24: Effect of Notice to Acting Partner

60

Q.

What are the requirements for notice to a partner.

60

Section 25: Liability of a Partner for acts of the Firm

60

Q.

Define in brief section 25.

60

Section 26: Liability of the Firm for Wrongful acts of a Partner

61

Q.

Whether a firm is liable for wrongful acts of partner done in the ordinary course of business.

61

Torts of a Partner

62

Q.

Whether a firm is vicariously liable for the acts of partner.

62

Section 27: Liability of Firm for Misapplication by Partners

63

Q.

What is the liability of firm for misapplication of property by partners?

63

Section 28: Holding out

64

Q.

Define Holding out with the help of examples and case-laws.

64

Liability for holding out

65

Q.

Explain the essentials elements of holding out.

66

Q.

Define the case law Beaven v. National Bank Ltd.

66

Principle of Holding out and the Retired Partner

67

Q.

Discuss the principles of Scarf v. Jardin.

67

Exception to the principle of holding out

68

Q.

Explain the exception to the principle of holding out.

68

Transferee of Partner’s Interest (Section 29)

68

Section 29: Rights of Transferee of a Partner’s Interest

68

Q.

Briefly lay down the principle explained in section 29.

69

Section 30: Minors Admitted to the Benefits of Partnership

70

Q.

Whether minor can be admitted to the benefits of partnership.

70

Section 30: Of the Act Deals with the Rights, Liabilities and Disabilities of a Minor in the Partnership

71

Q.

Explain with case-laws the rights, liabilities and disabilities of a minor.

71

Minor’s Admission to the Benefits of Partnership

72

Minor’s Position During Minority

72

Right of election to become or not to become a partner by a minor after he becomes a major

72

Sharing of Losses

73

Agreement with Minor

73

CHAPTER V

INCOMING AND OUTGOING PARTNERS

Section 31: Introduction of a Partner

74

Q.

Explain the procedure how a partner is introduced as a partner in the firm.

74

Modes of Introduction of a Partner

75

Q.

Explain the modes to introduce a partner in a firm.

75

1

Introduction of Partners by Agreement

75

2.

Introduction in accordance with a contract between the parties

75

Q.

Explain the facts of Byrne v. Reid.

75

Section 32: Retirement of a Partner

76

Q.

What are the modes of retirement of a partner from the firm?

76

An outgoing partner or retirement of a partner

77

Retirement of partner

77

Q.

Define Retirement.

77

How can a partner retire

77

Section 7 Partnership at Will

77

Section 33: By Expulsion

78

Section 34: Insolvency of a Partner

79

Q.

Insolvency is one of the grounds to cease a person as partner in a firm. Explain.

79

Insolvency of a partner

79

Dissolution on Insolvency

79

Q.

How a firm to be dissolved on insolvency and what are the effects?

79

Effect of Insolvency of a Partner

79

Section 35: Liability of Estate of Deceased Partner

79

Section 36: Rights of outgoing partner to carry on competing business

80

Q.

What are the restrictions on the outgoing partner to carry on the competing business?

80

Agreement in restraint of trade

80

Rights of outgoing partners to carry on competing business

80

Essentials

80

Q.

Explain the facts of Espley v. Williams.

81

Section 37: Right of outgoing partner in certain cases to share subsequent profits

81

Q.

Whether a outgoing partner is entitled to share subsequent profits.

81

Q.

Explain the facts of Barclays Bank Trust Co. Ltd. v. Bluff.

82

Section 38: Revocation of continuing guarantee by change in firm

83

Effect of change

83

Q.

What is continuing guarantee and how can it be revoked by firm?

83

Continuing Guarantee

 83

CHAPTER VI

DISSOLUTION OF A FIRM

Section 39: Dissolution of a Firm

85

Q.

Define “Dissolution of firm”.

85

Dissolution and Reconstitution

85

Q.

What principle is laid down in case of Commissioner of Income-tax v. Pigat Champan.

85

Nature of binding

86

Section 40: Dissolution by agreement

86

Dissolution by Agreement

86

Q.

Define the dissolution by Agreement.

86

Dissolution of old firm

87

Cessation of business

87

Stopping of main business

87

Section 41: Compulsory Dissolution

88

Conditions for dissolution

88

Q.

What are the conditions and methods for compulsory dissolution.

88

Effect of Insolvency

88

Section 42: Dissolution on the happening of certain contingencies

89

Q.

What are the contingencies which happen to dissolution of firm.

89

(1)

Fixed term

89

(2)

On completion of adventures or undertakings

89

(3)

By death of a partner

90

(4)

Insolvency of Partner

91

Q.

When there is a partnership at Will it dissolves by notice explain!

91

Section 43: Dissolution by Notice of Partnership at Will

91

(1)

 Notice

91

(2)

 Dissolution at Will

91

(3)

Dissolution by notice

92

(4)

 Notice must be reasonable

92

Section 44: Dissolution by the court

93

Q.

Explain the grounds on which the court may dissolve the firm.

93

(a)

A partner becoming of unsound mind

94

(b)

A partner becoming permanently incapable

94

(c)

Partner guilty of conduct

94

(d)

Wilful or persistence breach of agreement

94

(e)

Transfer of interest

94

(f)

Perpetual loss

94

(g)

Just and equitable

94

Section 45: Liability for acts of partners done after dissolution

95

Q.

Whether a partner is liable for acts done after dissolution.

95

Share in the partnership assets

95

Section 46: Rights of partners to have business wound-up after dissolution

95

Q.

What is the procedure to wind-up the firm after dissolution?

95

Section 47: Continuing authority of partners for purpose of winding-up

96

Q.

The partners are in the continuing authority in a firm even after dissolution explain!

96

Section 48: Mode of Settlement of accounts between partners

96

Q.

What are the methods in settling the accounts of firm after dissolution?

96

Section 49: Payment of firm debts and of separate debts

97

Section 50: Personal profits earned after dissolution

97

Q.

Define section 50

97

Section 51: Return of premium on premature dissolution

97

Section 52: Rights where partnership contract is rescinded for fraud or misrepresentation

98

Section 53: Right to restrain from use of firm name or firm property

98

Q.

Explain the restriction laid down in section 53 of Partnership Act.

98

Section 54: Agreement of restraint of trade

98

Section 55: Sale of Goodwill after Dissolution

98

(1)

Right of buyer and seller of goodwill

98

Q.

What are the rights of buyer and seller of goodwill?

98

(2)

Agreement in restraint of trade

99

Goodwill: Sale after dissolution

99

Rights of partners as to goodwill

99

Goodwill does not survive

99

Rights of partners to restrain use of partnership name

100

Dissolution under trading with the enemy legislation

100

Chapter VII

REGISTRATION OF FIRMS

Section 56: Power to exempt from application to this chapter

101

Section 57: Appointment of Registrars

101

Q.

Explain the appointment of Registrars.

101

Section 58: Application for Registration

101

Q.

What are the points which need to be mentioned in application for Registration.

101

Section 59: Registration

102

Q.

Define section 59

102

Section 60: Recording of alteration in firm name and principal place of business

102

Section 61: Noting of closing and opening of branches

103

Section 62: Noting of changes in name and addresses of partners

103

Section 63: Recording of changes on dissolution of a firm

103

Recording of withdrawal of a minor

104

Section 64: Rectification of mistakes

104

Section 65: Amendment of Register by order of court

104

Section 66: Inspection of register and filed documents

104

Section 67: Grant of Copies

105

Section 68: Rules of evidence

105

Section 69: Effect of non-Registration

105

Q.

What are the consequences of the non-registration of firm?

105

Effects of non-registration

107

(1)

 Suits between partners and firm – Sub-section (1)

107

Q.

If a firm is not registered whether a suit can be instituted by or against the firm?

107

(2)

Suit only by an authorised person

108

(3)

Suits between firm and third parties section 69(2)

109

Problems

109

Rights arising from a contract

111

Q.

What are the rights which arise only from a contract?

111

No. 3 Bar to claim of set-off and other proceedings

111

Q.

Whether section 69 is also applicable on set-off or counter-claim.

111

Q.

What are the exceptions of section 69?

112

(1)

Suit for dissolution—section 69(3)(a)

112

(2)

Suit on behalf of an insolvent partner section 69(3)(b)

113

(3)

Suit where provisions relating to registration of firms do not apply [section 69(4)(a)]

113

(4)

When value of the suit does not exceed Rs 100 (section 69(4)(b)

113

Suit filed in Individual Capacity

113

Registration Subsequent to the filing of the suit

113

Criminal proceedings

113

Section 70: Penalty for furnishing false particulars

113

Q.

What penalty is imposed for furnishing false particulars?

113

Section 71: Power to make rules

114

Q.

Define the law-making powers of State Government.

114

Chapter VIII

SUPPLEMENTAL

Section 72: Mode of giving public Notice

115

Section 73: Repeals

115

Section 74: Savings

116

Table of cases

116

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