Partnership Act

Ans: Section 41 of Indian Partnership Act, 1932 mentions compulsory dissolution.  According to section 41(1) of partnership act, 1932, the partnership will be dissolved if one of the person gets insolvent. If the partners gets insolvent,  the business will have to be compulsorily dissolved. 'Delectus personae'  means personal skills and if the partners gets insolvent,  the personal skills will be compulsorily dissolved. According to section 37 of Indian Contract Act, the Contract gets dispensed and it needs not to be performed when the person who is to be performed lost his skills i.e., in case of death, physically disabled after Contract,  etc. According to section 41(2) of partnership act, 1932, if any event occurs and it becomes unlawful for any act, the partnership gets dissolved.  For instance: The prohibition of sale of liquor is illegal and the partnership becomes unlawful and gets dissolved. Suppose there are two businesses, i.e., one is of selling ...

Ans: Section 40 mentions that a firm can be dissolved either with the consent of all partners or pursuant to a contract between the partners. Dissolution by consent applies when the firm is for fixed period or at will. The consent may be implied. In case of dissolution by way of contract between the partners such contract express or may be contained in the partnership deed itself or in a separate agreement. When there is a prior agreement between the partners as to dissolution of the firm, the firm can be dissolved as per the agreement even if all the partners are not willing to dissolve the firm at the moment.

Ans: According to Section 39 of partnership act, 1932 , the "dissolution of the firm" refers to the dissolution of the partnership between all partners in a firm.

Ans: In K.D. Kamath & Co. v. CIT, (1971) 2 SCC 873 Supreme Court held that two conditions are essential to constitute partnership; firstly, there must be an agreement to share the profit or losses of the business and secondly, the business must be carried on by all the partners or any one of them acting for all. The principle of agency is implicit in second requirement.

Ans: In Wallace Brothers v. CIT, (1948) 50 Bom, LR 482 (P(C) the court observed that the expression 'acting for all' is intended to emphasize the principle that partners when they carry on business of the firm act as agents as well as principles. In Chimanram v. Jayautilal, ILR 1939 Bom. 616 , the court held that the test of liability is not merely whether there is participation or sharing of profits but whether there is such sharing of profits as to constitute relation of principal and agent between the person taking profits and those carrying on the business.

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 mutual agency is...

Ans: 6. Mode of determining existence of partnership.—In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Explanation 1.—The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners. Explanation 2.—The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business; and in particular, the receipt of such share or payment— (a) by a lender of money to persons engaged or about to engage in any business, (b) by a servant or agent as remuneration, (c) by the widow or child of a deceased partner, as annuity, or (d) by a previous ow...