Partnership Act

Ans: Other partners will not be liable to fraud committed by one partner if it does not come under implied and expressed authority of partner. Thus other partners will not be liable.  Section 10 of Indian Partnership Act,  1932 mentions about the duty to indemnify for loss caused by fraud.  Every partner shall indemnify the firm for any loss caused to it by his fraud in the  conduct of the business of the firm. Section 19 mentions about the implied authority of partner and thus fraud is not the implied authority of partner.  According to section 4( definition of partner) , section 6( mode of determining existence of partnership), section 13( mutual rights and liabilities) and section 16( personal profit earned by partners) and section 18( partner to be an agent of firm ), the other partners will be liable only for the compensation of money earned by fraud of one partner and not for the punishment. 

Q: Harish  made a fraud with another partnership firm,  are all partners liable for his fraud  ?

Ans: Under section 4 of Indian Partnership Act,  1932, the definition of partner is mentioned. According to section 4 of Indian Partnership Act,  1932, the partnership is made between two  persons. The persons can be the natural person as well as artificial person.  The partnership firm is not a seperate legal entity and all the persons of the firm will be the partners with another firm.  The company has a seperate legal entity,  A company is a “Separate Legal Entity” having its own identity distinct from its members . As a legal entity, a company can own a property in its own name, can sue as well as can be sued in its own name and can also enjoy perpetual succession, among others. In case of Mahabir cold storage v. CIT, 1991, SC, it is mentioned that the partnership firm has not seperate legal entity. 

Ans: No ,Harish is a partner according to section 5 of partnership act, 1932 which says that partnership is not created by status but by agreement.  In case of Cox V. Hickman, it is clearly mentioned that if a person is a partner,  he must be entitled to receive the share of profit of the firm but every person who receives profit is not necessarily a partner.  According to section 4 of partnership act, partnership is between or among persons who have agreed to share profits between or among them but section 6 of partnership act mentions about the mode of determining the partnership and according to it , only the mere sharing of profit is not only the mode of determining partnership. 

Ans: The problem presented is based on section 30(3) of the Partnership Act. According to section 30(3)- "The share of a minor is liable for the acts of the firm, but the minor is not personally liable for any such act." Since in the present problem 'Zuber' is a minor and is entitled to receive profits in the partnership firm. The creditors will be successful in recovering their debts only from 'A' and 'B' and only to the extent of the profits going to 'Zuber'. 'Zuber' cannot be held personally liable for the loss caused to the firm.

Question:  ' Harish', 'Sachin' and 'Zuber' entered into a business venture for sharing of profits equally. 'Zuber' is a minor. The firm suffers huge losses and Zuber is also sued  along with other partners. To what extent and towards whom , Zuber will be the defaulter ?

Ans: Malomarch & Co. Vs. Court of Wards [(35 (1872) L.R.J.]),  the Privy Council in its judgment explained the principle of representation- "Where a person represents that he is a partner or permits others to consider him a partner, then the person will be liable like other partners of the firm. 

Ans:  The problem presented is based on section 28 of the Partnership Act. According to section 28, if a person represents that he is a partner, when in fact he is not, and a third party, in reliance on his said representation, pays goods or lends to the firm, the person making the representation shall be treated as a partner and  will be considered equally liable. In the present problem 'Harish' gives his name to the firm, when in fact he is not a partner in the firm as per the definition of section 4 partnership act, 1932. In such a case, 'Mukesh' has given loan to the firm knowing 'Harish' as a partner in the firm, then he can recover the money from Harish, Sachin and Zuber because 'Harish' represented himself as a partner in the said firm.  Hence,  Harish will be liable to pay money to 'Mukesh'.

Question 1. 'Harish', 'Sachin' and 'Zuber' entered into a business undertaking among themselves with the express terms that 'Harish' would give his name but Harish would neither give his labor nor money. The firm and all the three partners are jointly as well as severally sued by 'Mukesh' for the recovery of a certain sum of money. 'Harish' disclaims his liability in view of a specific agreement between 'Harish, 'Sachin' and 'Zuber'. Can he be held liable to 'Mukesh' as a partner of the firm?

Ans: There are also some other names of this Agreement which is known as Non Disclosure Agreement. These are trade secret agreement,  confidentiality agreement,  non-use agreement. 

Ans: Section 27 of partnership act,  1932 mentions about liability of firm for misapplication by partners where (a) a partner acting within his apparent authority attains money or property from a third party as well as misapplies it, the firm will be liable for the loss of the partner.  (b) If a firm in the course of its business attains money or property from a third party, and the money or property is misapplied by any of the partners while it is in the custody of the firm, the firm will also be liable for such loss. 

Ans: Section  25 of partnership act,  1932 mentions about the liability of a partner for acts of the firm.  Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. 

Ans:  Mode of doing act to bind firm.—In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the firm.

Ans: Thus , we have seen that the partnership has a significant role to run a business.  Coming together is business,  staying together is progress and working together is success. The different persons and minor can also become a partner in partnership firm. The authorities of partner are mentioned in partnership firm to carry out the business activities in lawful manner. The partners must be honest and trustworthy in partnership firm. According to Janine ogg , just one partnership with right person  can have an incredible impact on your business success . The partnership act, 1932 has also provided the authorities to minors in partnership. The minors can enhance their skills in partnership firm because the early bird catches the worm.

Ans: Introduction: In accordance with Steve Jobs, the great things in a business are never done by one person and they are done by a team of people. Thus, there will be minimum two persons to make a partnership where there are known as partners individually and collectively they make partnership firm. To run the partnership firm effectively,  the authorities are given to partners. Authority and Power are two different things and authority requires power and rights to accomplish the task.  Since the partnership can not be created by status and it is created by contractual agreement,  thus the rights, liabilities and powers decide the authority of partner in partnership firm. Section 18 to section 22 of partnership act,  1932 mentions about the authority of partner in partnership firm.

Ans: According to section 30(5) of partnership act, 1932, when a minor partner attains the age of majority i.e., 18 years of age, the public notice will be issued to minor partner within 6 months about the decision otherwise assumed to be major partner. Now the minor partner is a major partner and either the major partner will accept to be a partner or he will reject to be a partner. If the major partner accepts to be a partner in partnership firm, the major partner now will be at same position as that of others. The share of profit and property will be the same. The cardinal point here is that he will be personally liable for the acts when he was admitted to benefits i.e. now the major partner will be liable for all the acts that was performed previously when he entered into the partnership at his minor age.

Ans: A minor can be a partner during the age of minority and after attaining the age of majority. During the age of minority: Section 30 of partnership act, 1932 mentions about the minors admitted to the benefits of partnership. 1. He can not be a partner but he can be admitted to the benefits of the firm. 2. According to section 30(1) of partnership act, 1932, a minor partner can receive the profits and part of property of firm. 3. According to section 30(2) of partnership act, 1932, a minor partner has the right to access books of accounts. 4. According to Section 30(3) of partnership act, 1932, a minor partner is not personally liable and only his share of profit and property is liable. 5. According to section 30(4) of partnership act,  1932, a minor partner can file a suit against for his profit and property but firm can not file a suit against him.

Ans: The Authority in Partnership firm can be expressed Authority and implied authority.  The expressed authority in partnership firm means that it is specifically decided by all and it is mentioned that it is the authority of partner.  The actual authority is expressed authority.   The implied authority is assumed by some indirect permission and it is not expressed and mentioned about the authority of partner by direct permission.

Ans: Actual Authority in partnership: The Authority of each partner to take decisions for the business,  and enter into the transactions with other parties, will be specified in partnership agreement.  Since the partnership agreement is a contract,  its terms are the terms of contractual agreement between the parties. For instance: Harish is in trading business of partnership with luminous traders.  On the first day, Harish ordered for 500 bulbs with Daksh, a wholesale of electric products.  Harish had actual authority to enter into the contract with Daksh.

Ans: The member of a partnership is called partners and it is not mandatory that all the partners are the same or all the partners participate in the conduct of the business or share the profit or losses equally. The partners are classified depending on the nature of work, the extent of liability, etc. There are basically six types of partner: 1. Active/managing partner: The partner who takes participation in the conduct of the business daily is known as active partner. This active  partner is also called an ostensible partner. 2. Sleeping/Dormant: The Sleeping or dormant partner does not participate in the conduct of the business but he is bound by the conduct of all the partners. 3. Nominal partner: The nominal partner  is a partner to the firm only by his name. In reality, the nominal partner has no significant or real interest in the firm. 4. Partner in profit only: The partner who agrees to share the profit but does not suffer losses. Such partner will not be liable for a...

  Ans:   Principle of Mutual Agency:  The definition of partnership in Section 4 provides that business is carried by all or any of them acting for all. This phrase indicates the existence of mutual agency. If a person carrying on a business acts not only for himself but for others also they are partners. They are mutually principals and agents of each other. The principle of mutual agency was laid down in Cox v. Hickman, (1860) 8 HL Cas 268. The court held that the liability of one partner for the acts of his co-partner is in truth the liability of the principal for the acts of his agent. When two or more persons are engaged as partners in trade, each of them has an implied authority from the other to bind all in any others by contracts entered into according to the usual course of business. Every partner, in ordinary course of business, is an agent of other partner. The partner has authority to bind the whole firm according to ordinary usage to trade. The element of mut...

Ans: According to Section 26 of the Partnership Act, 1932 , a partner is liable for any damage caused to a third party by the wrongful act of the firm. The offence must be related to the partnership firm and it can be cognizable as well as non cognizable offence. Thus, the authority of one partner affects the other partner and thus the partner must be trustworthy in partnership firm. To limit the liability of partners, the limited liability partnership act was introduced in 2008. 

Ans:  According to section 7 of partnership act, 1932, when no provision is made by contract between the partners for the duration of their partnership or for the determination of their partnership, the partnership is "partnership at will". It means that the duration of partnership will depend upon the will of the partners.  Partnership at will provides all partners the authority to dissolve the firm by notice according to section 43 of partnership act,  1932. 

Ans:   The court can intervene in disputes of partnership firm because the partnership is not created by status and created by contract which is enforceable in court of law.  PARTNERSHIP NOT CREATED BY STATUS.  In accordance with section 5 of partnership act, 1932, the relation of partnership arises from contract and not from status; and, in  particular, the members of a Hindu undivided family carrying on a family business as  such, or a Burmese Buddhist husband and wife carrying on business as such are not  partners in such business.  According to section 5 of contract act, 1932, the partnership is not created by status. The relation of partnership arises: From Contract; and not from status. Example 1:  Members of Hindu undivided family (Joint Family) carrying on a family business together. The family members are not partners of each other because although,  they are carrying business together but the relationship between them has not arisen...

Ans: According to section 4 of partnership act, a partnership firm is an agreement between two or more individuals who agree to share the profits and losses, respectively. So, there must be atleast two persons for partnership. The Indian Partnership Act 1932 governs partnership but does not regulate the maximum no of partners in a partnership firm.  It is determined by the Companies Act 2013 (section 464), which allows up to 100 as the maximum no of partners in partnership firms. According to Rule 10 of Companies (Miscellaneous) Rules, 2014 states, the maximum no of partners in partnership firms should not exceed 50. A partnership firm is formed by a minimum of two people. The central government stated that the maximum no of partners in partnership firms could not exceed 50 as per Rule 10(2014).

Ans: According to section 44 of partnership act,  there are certain conditions in which the court can dissolve the partnership.   These conditions are as follows:  1. Unsound mind. 2. Permanent Incapacity/ Insolvent Partner 3. Misconduct of any partner  4. Persistent breach of contract  5. Transfer of interest : If there is continuous transfer of interest,  the firm can be dissolved.   6. Continuous or Perpetual losses 7. Other Justice and Equitable reason. 

Ans: Section 44 of partnership act mentions about the dissolution of partnership firm by court. The partnership can be dissolved with the intervention of Court or without the intervention of Court. Dissolution by intervention of court means that the Partnership firm can be dissolved by court in certain cases even though any partner would not like to dissolve the firm.  

Ans: According to section 43 of partnership act, 1932, the  dissolution of partnership will be applicable and the partnership can be dissolved by notice if all the members have made partnership at will.   If the partnership is not made by will, the partnership can not be dissolved by notice. 

Ans: Dissolution on the happening of contingent event (S.42):  According to section 42 of partnership act,  1932 , a firm may be dissolved on the happening of any of the following contingent event:  (i) Expiry of Fixed Period (ii) On achievement of specific task (iii) Death of Partner

Ans: Jai Narayan Misra & Others v/s Hashmathunnisa Begum & Others, 2002. According to the case of Jai Narayan Misra & Others v/s Hashmathunnisa Begum & Others, 2002, the partnership firm will be dissolved if there are two partners and if one partner gets died because the partnership business can not be run with one person because the two persons will be required for partnership firm.  

Ans: Dissolution of partnership firm without the intervention of Court:- 1. By Agreement (S.40) Section 40 of partnership act mentions that a partnership firm can be dissolved any time with the consent of all the partners whether the partnership is at will or for a fixed duration. A partnership can be dissolved in conformity with the terms of the Partnership Deed or of the terms of separate agreement. 2. Compulsory Dissolution (Sec.41):- In case of compulsory dissolution, any of the following events take place then it becomes compulsory for the firm to dissolute: (i) Insolvency of Partners:  In case all the partners or all the partners except one become insolvent because there must be atleast two persons for partnership.  (ii) Unlawful Business If the firm is engaged in more than one business which may have become unlawful, the unlawful business will be dissolved.  E.g. A and B charter a ship to go to foreign port and receive a cargo on the joint venture. War happens betw...

Ans: As far as dissolution of partnership is concerned, the dissolution of a Partnership firm will be effected in the following ways: · Dissolution without the intervention of the Court. · Dissolution by Court.

Ans: Dissolution of partnership is different from the dissolution of firm. Dissolution of a partnership firm merely includes an alteration in the relation of partners; whereas the dissolution of firm would amount to a complete closure of the business. 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 will be the dissolution of partnership with other partners and it would not be the dissolution of firm. Dissolution of partnership would alter the mutual relations of the partners but there is not the end of partnership firm.  In case of dissolution of firm, all the relations between the partners and the business of the firm will be ended. On dissolution of the firm, the business of the firm will be ended and its affairs are wound up by selling the assets and by paying the liabilities as well as discharging the claims of the partners. So, it can be said that the dissolution...

Ans: It implies the complete break down of the relation of partnership between all the partners.

Ans: Subhash Chandra V. Assistant Registrar,  AIR 2003, Allahabad. In this case, it was mentioned that the partnership firm will not get dissolved even after the death of any partner and the successor of partner can take the last share of profit of the deceased partner . Since the term is already mentioned in the contract, thus the partnership firm will not get dissolved.

Ans: Contingent Dissolution is due to happening of contingent events like after the completion of tenure of contract of partnership or due to the death of partner in partnership firm.  

Ans: Compulsory Dissolution of Partnership means that the Partnership will be compulsorily dissolved in two cases:  1. On being Insolvent  2. Unlawful dissolution 

Ans: Following are the types of dissolution of partnership firm:  1. Dissolution by consent.  2. Compulsory Dissolution. 3. Contingent Dissolution. 4. Dissolution by notice. 5. Dissolution of firm by court.