As per section 25, “Every partner is liable Jointly with all the other partners & also severally for all acts of the firm done while he is a partner". But the point to be. Indian Partnership Act, - Free download as PDF File .pdf), Text File .txt) or read online for free. Analysis of Registration and Dissolution of firms under the. Partnership Act, full and updated bare act with section box to help you reach any section instantly on the same page with PDF download.
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(1) This Act may be called the Indian Partnership Act, (2) It extends to the whole of India except the State of Jammu and Kashmir. (3) It shall come into force . Mercantile Law: The Indian. Partnership Act, Distinction between partnership and firm. Persons who have entered into partnership with one another are. The law relating to partnership in India which is contained in Indian Partnership Act (IX of ) is concerned partly with the rights and duties of partners.
In paying to each partner rateably what is due to him from the firm in for the advances as distinguished from capital. The contract may provide that a partner shall not carry on any business other than that of the irm while he is a partner Section In Talakchand Kanji Vora v. Vin Bautista. Thus the nature of the partnership is voluntary and contractual. Neither he invest in the irm nor takes part in the conduct of the business. It follows that an agreement between partners which enables one either to introduce a new partner in the irm over and above the existing partners or to substitute another partner in his place by novation, transfer or otherwise, could bind all the partners.
The disability is that of the firm and not of the people outside it. The contract providing for the dissolution may be contained in the partnership deed itself or in a separate agreement. This applies for all cases whether the firm is for a fixed period or at will. Modes of Dissolution A firm may be dissolved by any of the following ways: The dissolution of a partnership between all the partners of a firm is called the "dissolution of the firm".
Where immediately after dissolution. By Agreement [S. By Consent [S. Dissolution of a Firm When a firm is put to an end as between all the partners.
Section 39 declares: Dissolution of a Firm. Thus dissolution is something different from the retirement of a partner. Contingent Dissolution [S. Provided that. Compulsory Dissolution [S. By Notice [S. But where a partner gives notice at an importune moment or at a time when the dissolution will give him some advantage over the other partners.
The firm is dissolved as from the date mentioned in the notice or. The notice should be in writing and signed by the partner giving it and should be served upon all the partners. It was held that the notice of dissolution given by one of the partners was invalid as the operation of Section 43 was excluded by agreement to the contrary. A partnership which is not at the will cannot be determined by notice. Thus in Moss v. Elphicck19 a deed. At the suit of a partner.
Keshavlal20 the Supreme Court has expressed the opinion that in a partnership consisting of two partners only.
Dissolution By The Court. Dissolution by Court [S. In Talakchand Kanji Vora v. Dissolution was not allowed. In Whitwell v. The incapacity should be of permanent nature. By section 44 the court is empowered to order the dissolution of a firm at a suit of a partner in the following cases: Arthur21 a partner suffered from an attack of paralysis and that would be a strong ground for dissolution.
But the medical evidence showed that the attack was only temporary and that he already was improving. When one of the partners has become a person of unsound mind. When a partner. The court disallowed saying that the misconduct was not likely to affect the business of bankers. The other partners applied for dissolution on this ground. The whole purpose of a firm is to make profit. Milford22 a partner of the firm of bankers committed adultery with several women in the city where the business was carried on and his wife had left him.
In Snow v. When a partner other than the partner suing is guilty of conduct which is likely to affect prejudicially the conduct of the firm. Provided that the estate of a partner who dies. Consequences of dissolution Public notice and liability for acts done after dissolution [S. The first step in the process of dissolution of a firm is to give a public notice of dissolution.
This is necessary to terminate the liabilities of the partners by holding out and of the firm by estoppels. Bourne23 a partnership having been dissolved by the death of a partner. In Re Bourne. Provided that the firm is in no case bound by the acts of a partner who had been adjudicated insolvent.
The commencement of dissolution does not at once terminate the authority of the partners. Authority of Parties in Winding up [S. The authority continues firstly. After the dissolution of a firm the authority of each partner to bind the firm. This was held to be binding upon the representative of the deceased partner. Personal Profits Earned After Dissolution.
Where a firm is dissolved on the account of the death of a partner and if. Winding up [s. Subject to contract between the partners. Liability to Share Personal Profits [S. Provided that where any partner or his representative has bought the good will of the firm.
On the dissolution of a firm every partner or his representative has the right to have the property of the firm applied in payments of the debts and liabilities of the firm and to have surplus distributed among the partners with their rights. Mode of Settlement of Accounts [S. The mode of payments of accounts is laid down in section The section lays down the fundamental principles. As to losses. In paying each partner what is rateably due to him on the account of capital.
As to the application of the assets. In paying the debt of the firm to the third parties Second: In paying to each partner rateably what is due to him from the firm in for the advances as distinguished from capital.
Refund of Premium [S. Some of these rules found application in Garner v. Where a partner has paid a premium on entering into partnership for a fixed term. The residue. Return of Premium on Premature Dissolution. Under the terms and conditions of the partnership. It was held that firstly. Two partners contributed their shares of deficiency bit the third failed to do so. Where the firm is not constituted for a fixed period. Where a contract creating partnership is rescinded on the ground of fraud or misrepresentation of any of the parties thereto.
According to section 51 no refund is possible in the following cases: Where the dissolution is mainly due to the misconduct of the new partner himself 4.
Section Where the firm is not dissolved by the unexpected death of a partner. Where the dissolution is in pursuance of an agreement between the partners which contains no provisions for the return of the premium or any part of it. The agreement shall be valid: Provided that where any partner or his representative has brought the goodwill of the firm.
Partners may. Agreement in Restraint of Trade [Ss. Agreements In Restraint Of Trade.
They agreed that on the termination of the agency. In Dev Sharma v. The other partner sued to restrain him in terms of the agreement. One of the partners then obtained a renewal of agency in his favour. Neither of the partners was carrying out the business if the firm which came to an end on the determination of the agency and therefore.
Sale of Good Will [S. Where the goodwill of a firm is sold after dissolution. Sale of Goodwill after Dissolution. The agency was terminated and the firm was dissolved. Laxmi Narain Any partner may upon the sale of the goodwill of a firm.
But he cannot do the following: He may also advertise such business and attract customers. After selling the good will of the firm. He cannot represent that he is carrying on the business of the firm. The good will may be sold separately or along with the properties of the firm.
He cannot use the name of the firm. On the dissolution of a firm. He cannot solicit the customs of persons who were dealing with the firm before dissolution. Flag for inappropriate content. Related titles.
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George E. For example, A, a partner, borrows from B Rs 1, in the name of the irm but in excess of his authority, and utilizes the same in paying off the debts of the irm. Here, the fact that the irm has contracted debts suggests that it is a trading irm, and as such it is within the implied authority of A to borrow money for the business of the irm. This implied authority, as you have noticed, may be restricted by an agreement between him and other partners.
Now if B, the lender, is unaware of this restriction imposed on A, the irm will be liable to repay the money to B. On the contrary B's awareness as to this restriction will absolve the irm of its liability to repay the amount to B.
You should further note that the above-mentioned extension or restriction is only possible with the consent of all the partners. Any one partner, or even a majority of the partners, cannot restrict or extend the implied authority.
Partners, as agents of each other can make binding admissions but only in relation to partnership transaction and in the ordinary course of business; an admission or representation by a partner will not however, bind the irm if his authority on the point is limited and the other party knows of the restriction.
The section speaks of admissions and representations being evidenced against the irm. That is to say, they will affect the irm when tendered by third parties; they may not have the same effect in case of disputes between the partners themselves.
X and Y are partners in a irm dealing in spare - parts of different brands of motorcycle bikes. Z purchases a spare part for his Yahama motorcycle after being told by X that the sparepart is suitable for his motorcycle. Y, is ignorant about this transaction. The sparepart proves to be unsuitable for the motorcycle and it is damaged. X and Y both are responsible to Z for his loss.
Thus, the notice to one is equivalent to the notice to the rest of the partners of the irm, just as a notice to an agent is notice to his principal. This notice must be actual and not constructive.
It must be received by a working partner and not by a sleeping partner. Only then it would constitute a notice to the irm.
P, Q, and R are partners in a business for purchase and sale of second hand goods. R purchases a secondhand car on behalf of the irm from S. In the course of dealings with S, he comes to know that the car is a stolen one and it actually belongs to X. P and Q are ignorant about it. All the partners are liable to X, the real owner. The only exception would lie in the case of fraud, whether active or tacit. For example, A, a partner who actively participates in the management of the business of the irm, bought for his irm, certain goods, while he knew of a particular defect in the goods.
His knowledge as regards the defect, ordinarily, would be construed as the knowledge of the irm, though the other partners in fact were not aware of the defect. But because A had, in league with his seller, conspired to conceal the defect from the other partners, the rule would be inoperative and the other partners would be entitled to reject the goods, upon detection by them of the defect.
This is because that all the acts done within the scope of authority are the acts done towards the business of the irm Section The question of liability of partners to third parties may be considered under different heads. These are as follows: Every partner is liable jointly with other partners and also severally for the acts of the irm done while he is a partner. Again in order to bring a case under Section 25, it is necessary that the act of the irm, in respect of which liability is bought to be enforced against a party, must have been done while he was a partner.
Thus, where certain persons were found to have been partners in a irm when the acts constituting an infringement of a trademark by the irm took place, it was held that they were liable for damages arising out of the alleged infringement, it being immaterial that the damages arose after the dissolution of the irm. The irm is liable to the same extent as the partner for any loss or injury caused to a third party by the wrongful acts of a partner, if they are done by the partner while acting a in the ordinary course of the business of the irm b with the authority of the partners.
If the act in question can be regarded as authorized and as falling within either of the categories mentioned in Section 26, the fact that the method employed by the partner in doing it was unauthorized or wrongful would not affect the question. Furthermore, all the partners in a irm are liable to a third party for loss or injury caused to him by the negligent act of a partner acting in the ordinary course of the business.
For example, one of the two partners in coal mine acted as a manager was guilty of personal negligence in omitting to have the shaft of the mine properly fenced. As a result thereof, an injury was caused to a workman. The other partner was held responsible for the same. Section 27 provides that a when a partner, acting within his apparent authority, receives money or other property from a third person and misapplies it or b where a irm, in the course of its business, received money or property from a third person and the same is misapplied by a partner, while it is in the custody of the irm, is liable to make good the loss.
It may be observed that the workings of the two clauses of Section 27 are designed to bring out clearly an important point of distinction between the two categories of cases of misapplication of money by partners. Clause a covers the misapplication of money or property belonging to a third party made by the partner receiving the same.
For this provision to the attracted, it is not necessary that the money should have actually come into the custody of the irm. On the other hand, the provision of clause b would be attracted when such money or property has come into the custody of the irm and it is misapplied by any of the partners.
The irm would be liable in both the cases. If receipt of money by one partner is not within the scope of his apparent authority, his receipt cannot be regarded as a receipt by the irm and the other partners will not be liable, unless the money received comes into their possession or under their control.
A, B, and C are partners of a place for car parking. P stands his car in the parking place but A sold out the car to a stranger. For this liability, the irm is liable for the acts of A. The rights of such a transferee are as follows: He is only entitled to receive the share of the proits of the transferring partner and he is bound to accept the proits as agreed to by the partners, i. By virtue of Section 31, which we will discuss hereinafter, no person can be introduced as a partner in a irm without the consent of all the partners.
A partner cannot by transferring his own interest, make anybody else a partner in his stead, unless the other partners agree to accept that person as a partner. At the same time, a partner is not debarred from transferring his interest. As a general rule, the partners are at liberty to determine their rights and obligation per se as between themselves by means of a contract between them.
It follows that an agreement between partners which enables one either to introduce a new partner in the irm over and above the existing partners or to substitute another partner in his place by novation, transfer or otherwise, could bind all the partners.
If a partner has an unconditional right to transfer his share so as to substitute another person in his stead, then he will not be liable for any acts of the irm subsequent to a valid transfer of his share and serving notice of it on his copartners.
This would, in effect, by tantamount to his retirement from the irm and hence his rights and liabilities would be governed by Section 32 of the Act. Thus on admission of a new partner or retirement of a partner or expulsion of the partner, or on insolvency of a partner etc. Introduction of new partner Section As we have studied earlier, subject to a contract between partners and to the provisions regarding minors in a irm, no new partners can be introduced into a irm without the consent of all the existing partners.
Rights and liabilities of new partner: The liabilities of the new partner ordinarily commence from the date when he is admitted as a partner, unless he agrees to be liable for obligations incurred by the irm prior to the date.
The new irm, including the new partner who joins it, may agree to assume liability for the existing debts of the old irm, and creditors may agree to accept the new irm as their debtor and discharge the old partners. Novation is the technical term in a contract for substituted liability, of course, not conined only to case of partnership.
Thus an agreement between the partners and the incoming partner that he shall be liable for existing debts will not ipso facto give creditors of the irm any right against him.
In case of partnership of two partners: This section does not apply to a partnership of two partners which is automatically dissolved by the death of one of them. In this event there is no partnership at all for any new partner to be introduced into it without the consent of others. Retirement of a partner Section A partner may retire: Such a partner, however, continues to be liable to the third party for acts of the irm after his retirement until public notice of his retirement has been given either by himself or by other partners.
But the retired partner will not be liable to any third party if the latter deals with the irm without knowing that the former was partner [Sub-Sections 3 and 4 ]. Right of outgoing partners: Although this provision has imposed some restrictions on an outgoing partner, it effectively permits him to carry on a business competing with that of the irm. However, the partner may agree with his partners that on his ceasing to be so, he will not carry on a business similar to that of the irm within a speciied period or within speciied local limits.
Such an agreement will not be in restraint of trade if the restraint is reasonable [Section 36 2 ]. It has been held that in the absence of evidence of any uniform usage to the contrary, the assets property should be taken at their fair value to the irm at the date of the account and not at their value as appearing in the partnership.
If on the other hand, any partner who assumes to act in exercise of the option, does not in all material respects comply with the terms thereof, then he would be liable to account under the provisions contained in Para a above Proviso to Section As we have already stated earlier, a retiring partner continues to be liable to third party for acts of the irm after his retirement until public notice of his retirement has been given either by himself or by any other partner.
But the retired partner will not be liable to any third party if the latter deals with the irm without knowing that the former was partner [Sections 32 3 and 4 ]. The liability of a retired partner to the third parties continues until a public notice of his retirement has been given. As regards the liability for acts of the irm done before his retirement, the retiring partner remains liable for the same, unless there is an agreement made by him with the third party concerned and the partners of the reconstituted irm.
Such an agreement may be implied by a course of dealings between the third party and the reconstituted irm after he had knowledge of the retirement [Section 32 2 ]. If the partnership is at will, the partner by giving notice in writing to all the other partners of his intention to retire will be deemed to be relieved as a partner without giving a public notice to this effect. Expulsion of a partner Section A partner may not be expelled from a irm by a majority of partners except in exercise, in good faith, of powers conferred by contract between the partners.
It is, thus, essential that: If all these conditions are not present, the expulsion is not deemed to be in bona ide interest of the business of the irm. The test of good faith as required under Section 33 1 includes three things: If a partner is otherwise expelled, the expulsion is null and void.
The only remedy, when a partner misconduct in the business of the irm, is to seek judicial dissolution. You should also note that under the Act, the expulsion of partners does not necessarily result in dissolution of the irm. The invalid expulsion of a partner does not put an end to the partnership even if the partnership is at will and it will be deemed to continue as before. A, B and C are partners in a Partnership irm.
They were carrying their business successfully for the past several years. A got angry on the incident and he convinced C to expel B from their partnership irm. B was expelled from partnership without any notice from A and B.
Considering the provisions of Indian Partnership Act, state whether they can expel a partner from the irm. The test of good faith as required under Section 33 1 , Indian Partnership Act, includes three things: Therefore, expulsion of Partner B is not valid. In this context, you should also remember that provisions of Sections 32 2 , 3 and 4 which we have just discussed, will be equally applicable to an expelled partner as if he was a retired partner.
Insolvency of a partner Section When a partner in a irm is adjudicated an insolvent, he ceases to be a partner on the date of the order of adjudication whether or not the irm is thereby dissolved.
His estate which thereupon vests in the oficial assignee ceases to be liable for any act of the irm done after the date of the order, and the irm also is not liable for any act of such a partner after such date whether or not under a contract between the partners the irm is dissolved by such adjudication. Effects of insolvency a The insolvent partner cannot be continued as a partner. Death of a partner Section Where under the contract a irm is not dissolved by the death of a partner, the estate of the deceased partner is not liable for act of the irm after his death.
Ordinarily, the effect of the death of a partner is the dissolution of the partnership, but the rule in regard to the dissolution of the partnership, by death of partner is subject to a contract between the parties and the partners are competent to agree that the death of one will not have the effect of dissolving the partnership as regards the surviving partners unless the irm consists of only two partners.
In order that the estate of the deceased partner may be absolved from liability for the future obligations of the irm, it is not necessary to give any notice either to the public or the persons having dealings with the irm.
X was a partner in a irm. A suit for goods sold and delivered would not lie against the representatives of the deceased partner. Revocation of continuing guarantee by change in the irm Section Section 38 of the Indian Partnership Act provides that a continuing guarantee given to a irm or to third party in respect of the transaction of a irm is, in the absence of an agreement to the contrary, revoked as to future transactions from the date of any change in the constitution of the irm.
You should note that the above rule is subject to an agreement to the contrary. The agreement, if any, to the contrary required to displace the effect of Section 38, must be clear. Such contract need not always be expressed, it may be implied from the course of dealing between the partners Section Section 12 gives rules regulating the conduct of the business by the partners and Section 13 lay down rules of mutual rights and liabilities.
Sections 14 to 17 also contain particular rules which become useful and important while determining the relations of partners to one - another. What is essential to note, however, is that all these rules are subject to contract between the parties. As regards third parties, a partner is the agent of the irm for all purposes within the scope of the partnership concern. His rights, powers, duties and obligations are in many respects governed by the same rules and principles which apply to the agent.
Generally, he may pledge or sell the partnership property; he may buy goods on account of the irm; he may borrow money, contract debt and pay debts on account of the irm; he may draw, make, sign, endorse, accept, transfer, negotiate and get discounted promissory notes, bills of exchange, cheques and other negotiable papers in the name and account of the irm. The implied authority of the partner to bind the irm is restricted to acts usually done in the business of the kind carried on by the irm.
He is also empowered under the Act to do certain acts in an emergency so as to bind the irm. The irm, however, is bound only by those acts of a partner which were done by him in his capacity as a partner. A partner may in some circumstances become liable on equitable grounds for obligations incurred by a copartner in doing acts in excess of his authority, real or implied. He may also become liable for an unauthorized act of his copartner on the ground of estoppel.
The provisions relating to registration of irms are being covered under the Sections 56 to 71 of the Indian Partnership Act, Registration means to get the partnership irm registered with the registrar of irms.
Before the enactment of the Partnership Act, there was no provision for the registration of the partnership irms in India. And as such the third party faced dificulty to prove the existence of partnership and claim against all the members of the irm.
Thus the provisions relating to the registration were included under the Indian Partnership Act, This present Act made the registration optional entirely at the discretion of the partners. Under the Partnership Act it is not necessary for every partnership irm to get itself registered, but an unregistered irm suffers from a number of disabilities.
It is not essential that the irm should be registered from the very beginning.
When the partners decide to get the irm registered, as per the provisions of Section 58 of the Indian Partnership Act, they have to ile the statement in the prescribed form. The aforesaid statement is to be signed by all the partners or by their agents specially authorized in this behalf. Each partner so signing it shall also verify it in the manner prescribed. When the Registrar is satisied that the above mentioned provisions have been complied with, he shall record an entry of this statement in the register called the Register of Firms and shall ile the statement.
Subsequent alterations as alterations in the name, place, constitution, etc. When the registration is complete? When the Registrar is satisied that the provisions of Section 58 have been duly complied with, he shall record an entry of the statement in a Register called the Register of Firms and shall ile the statement.
Then he shall issue a certiicate of Registration. However, registration is deemed to be complete as soon as an application in the prescribed form with the prescribed fee and necessary details concerning the particulars of partnership is delivered to the Registrar.
The recording of an entry in the register of irms is a routine duty of Registrar. Registration may also be effected even after a suit has been iled by the irm but in that case it is necessary to withdraw the suit irst and get the irm registered and then ile a fresh suit.
Therefore, there is a penalty for non-registration of irms. But the Indian Partnership Act does not make the registration of irms compulsory nor does it impose any penalty for non-registration. However, under Section 69, non-registration of partnership gives rise to a number of disabilities which we shall presently discuss. Although registration of irms is not compulsory, yet the consequences or disabilities of non-registration have a persuasive pressure for their registration. These disabilities briely are as follows: The irm or any other person on its behalf cannot bring an action against the third party for breach of contract entered into by the irm, unless the irm is registered and the persons suing are or have been shown in the register of irms as partners in the irm.
A partner of an unregistered irm or any other person on his behalf is precluded from bringing legal action against the irm or any person alleged to be or to have been a partner in the irm. Non-registration of a irm does not, however effect the following rights: The right of third parties to sue the irm or any partner.
The right of partners to sue for the dissolution of the irm or for the settlement of the accounts of a dissolved irm, or for realization of the property of a dissolved irm. The power of an Oficial Assignees, Receiver of Court to release the property of the insolvent partner and to bring an action. Let us now examine the following cases: In , A dies. Now the irst question for our consideration is whether the suit is maintainable. As regards the question whether in the case of a registered irm whose business was carried on after its dissolution by death of one of the partners , A suit can be iled by the remaining partners in respect of any subsequent dealings or transactions without notifying to the Registrar of Firms, the changes in the constitution of the irm, it was decided that the remaining partners should sue in respect of such subsequent dealings or transactions even though the irm was not registered again after such dissolution and no notice of the partner was given to the Registrar.
The test applied in the these cases was whether the plaintiff satisied the only two requirements of Section 69 2 of the Act namely, i the suit must be instituted by or on behalf of the irm which had been registered; ii the person suing had been shown as partner in the register of irms. Now, in the above illustration, what difference would it make, if in B and C had taken a new partner, D, and then iled a suit against X without fresh registration?
Where a new partner is introduced, the fact is to be notiied, under Section 63 1 of the Act to Registrar who shall make a record of the notice in the entry relating to the irm in the Register of irms.
Thus the Dissolution of irm means the discontinuation of the jural relation existing between all the partners of the irm. But when only one or the partners retires or becomes incapacitated from acting as a partner due to death, insolvency or insanity, the partnership, i. In such cases, there is in practice, no dissolution of the irm.
The particular partner goes out, but the remaining partners carry on the business of the irm, it is called dissolution of partnership. In the case of dissolution of the irm, on the other hand, the whole irm is dissolved.
The partnership terminates as between each and every partner of the irm. Dissolution without the order of the court or voluntary dissolution: It consists of following four types: A irm may be dissolved with the consent of all the partners or in accordance with a contract between the partners.
A irm is compulsorily dissolved- i by adjudication of all the partners or of all the partners but one as insolvent, or ii by happening of any event which makes it unlawful for the business of the irm to be carried on. A irm is carrying on the business of trading a particular chemical and a law is passed which bans on the trading of such a particular chemical. The business of the irm becomes unlawful and so the irm will have to be compulsorily dissolved.
Subject to contract between the partners a irm can be dissolved on the happening of any of the following contingencies- i where the irm is constituted for a ixed term, on the expiry of that term. Where a partnership was constituted for a ixed term or for carrying out a particular adventure or undertaking the death or insolvency does not dissolve the partnership irm, unless there is any contract to the contrary. Where the partnership is at will,the irm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the irm.
If the date is mentioned, the irm is dissolved as from the date mentioned in the notice as the date of dissolution, or If no date is so mentioned,as from the date of the communication of the notice.
Court may, at the suit of the party, dissolve a irm on any of the following ground: Where a partner has become of unsound mind,the court may dissolve the irm on a suit of the other partners or by the next friend of the insane partner.
When a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner, there the court may dissolve the irm. Where a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of business, the court may order for dissolution of the irm, by giving regard to the nature of business.
Where a partner other than the partner suing, willfully or persistently commits breach of agreements relating to the management of the affairs of the irm or the conduct of its business, or otherwise so conduct himself in matters relating to the business that it is not reasonably practicable for other partners to carry on the business in partnership with him, there the court may dissolve the irm at the instance of any of the partners.
If one of the partners keeps erroneous accounts and omits to enter receipts or if there is continued quarrels between the partners or there is such a state of things that destroys the mutual conidence of partners, the court may order for dissolution of the irm.
Where a partner other than the partner suing, has transferred the whole of his interest in the irm to a third party or has allowed his share to be charged or sold by the court, in the recovery of arrears of land revenue, the court may dissolve the irm at the instance of any other partner.
Where the business of the irm cannot be carried on except at a loss in future also, the court may order for its dissolution. The following are the cases for the just and equitable grounds- i Deadlock in the management.
Liabilities or obligations of partners a Continuing liability until public notice: In spite of dissolution of the irm, partners continue to be liable for any act done by any of them, which would have been an act of the irm if done before the dissolution, until public notice is given of the dissolution.
For example: X and Y who carried on business in partnership for several years, executed on December 1, a deed dissolving the partnership from the date, but failed to give a public notice of the dissolution. In such a case, Y also would be liable for the amount.
To this rule, there are some exceptions. Even where notice of dissolution has not been given, there will be no liability for subsequent acts of other partners in the case of: On a partnership being dissolved, any partner or his representative shall have right, against the others i to have property of the irm applied in payment of the debts of the irm, and ii to have the surplus distributed amongst the partners or their representatives according to their respective rights.
The authority of a partner to bind the irm and other mutual rights and obligations continue: In settling the accounts of a irm after dissolution, the following rules, laid down by Section 48 of the Indian Partnership Act, subject to an agreement by the partners, must be observed. For example, X and Y were partners sharing proits and losses equally and X died. It may be noted that prima facie, accounts between the partners shall be settled in the manner prescribed by partnership agreement.
The above-mentioned rules apply subject to any agreement between partners. The rules laid down in Section 48, just speciied, as to what will be the mode of settlement of accounts in the usual course of business.
But if the partners, by their agreement, express any different intention as to the mode in which losses will have to be borne eventually or the manner in which capital or advances will have to be paid to any partner, such an intention must be given effect to.
However, any such agreement cannot affect the rights of the creditors of the irm. The signiicance of the foregoing provisions is that if the assets of the irm are not suficient to pay off the liabilities of the irm including the amount due to each partner on account of capital, each partner would individually be liable to contribute towards the losses, including deiciencies of capital, in the proportion in which he is entitled to share proits.
Where there are joint debts due from the irm and also separate debts due from any partner: In terms of Section 51, the partner paying a premium on entering into partnership for a ixed period becomes entitled to the return of an appropriate portion of the premium.
We shall discuss the provisions of Section 51 later in detail. Where a irm is dissolved by the death of a partner and the surviving partners or the surviving partners along with the representatives of the deceased partner carry on business of the irm, any personal proits by them, before the irm is fully wound up, must be accounted for by them to other partners.
Thus a lease expiring on the death of a partner, which is renewed by the surviving partners, before inal winding up, belongs to the partnership. This section has to be read with Section 53 which provides that in the absence of an agreement to the contrary, each partner or his representative is entitled to restrain by injunction other partners from carrying on a similar business in the name of the irm or from using the property of the irm for their own beneit till the affairs of the irm are completely wound up.
According to Section 51, in the case of dissolution of partnership earlier than the period ixed for it, the partner paying the premium is entitled to the return of the premium of such part thereof as may be reasonable, regard being had to the terms of agreement and to the length of time during which he was a partner, except when the partnership is dissolved: At the end of 8 years a quarrel arises between X and Y and a dissolution is declared.
In such a case, X will be entitled to a return of such amount of the premium from Y as may be deemed reasonable. What is reasonable will depend upon the circumstances of each case. The partner paying the premium gets a proportionate part of the premium where the partnership is dissolved: A partnership agreement is a contract bases on amount of conidence.
Goodwill on dissolution Section What the purchaser of goodwill acquires is i the right to carry on the same business under the old name and ii to represent himself to the customers of the old irm as the successor in the business of the old irm. The partners selling the goodwill of a irm can: In the case of registered irms, apart from the aforesaid notiication, a notice is also required to be served on the Registrar of Firms under Section 63 where the matters relate to a the retirement or expulsion of a partner, or b dissolution of the irm, or c the election, on attaining majority, to be or not to be a partner, by a person who as a minor, was admitted to the beneit of partnership.
The Act does not make registration of the irm compulsory, yet the effect of the rules relating to the consequences of non-registration is such as practically necessitates the registration of the irm at one time or other. Certain disabilities have been imposed on partners of an unregistered irm seeking to enforce certain claims in the Civil Courts.
A irm which is not registered is not able to enforce its claim against third parties in the Civil Courts; and any partner who is not registered is not able to enforce his claim either against third parties or against the fellow partners. An unregistered partner may, however, sue for the dissolution of the irm or for accounts only if the irm is already dissolved. Dissolution of a irm means the breaking up or extinction of the relationship which subsisted between all the partners of the irm under various circumstances contemplated by Act.
A partnership can be dissolved only in accordance with the manner prescribed under the Act.
The most important element in partnership is: A irm is the name of: In the absence of agreement to the contrary all partners are: A minor is: A partnership at will is one: Active partner is one who: Every partner has the right to: Partners are: A partner can retire on: A partner can be expelled if: Death of partner has the effect of: Registration of a irm is: An unregistered irm cannot claim: On dissolution the partners remain liable to till: Which of the following statements, about the registration of irm, is not true: As per the accepted view, the registration of the irm is considered complete when a Complete application for registration is iled with the Registrar.
Which of the following is not disability of an unregistered irm? It is the duty of every partner to share in equal proportions the losses suffered by the irm. Which of the following is not the right of a partner i.
A partner who receives certain remuneration from the irm as per the express agreement, becomes an employee of the irm. Goodwill is the property of the irm, and like any other property it belongs proportionately to all the partners. Which of the following acts are not included in the implied authority of a partner?
A person, even if he is not a partner in the irm, may be held liable as partner if he knowingly permits himself to be represented as a partner. After retirement from irm, which of the following partners is not liable by holding out, even if the public notice of retirement is given?
A valid partnership can be formed with one major partner and other minors admitted only to the beneits of the irm. The reconstitution of the irm takes place in case a Admission of a partner.
A new partner can be admitted in the irm with the consent of a All the partners. A partner may be retire from an existing irm a with consent of all partners. An accepted view is that where the existence of a retiring partner was not known he is not liable for debts incurred by the irm after his retirement even if public notice of his retirement was not given a True b False A partner may be expelled from the irm on the fulillment of the condition that the expulsion power is exercised. On the insolvency of a partner, the insolvent ceases to be a partner in the irm whether the irm is dissolved or not.
On which of the following grounds, a partner may apply to the court for dissolution of the irm? An accepted view is that where all the partners except one die or become insolvent, the irm is dissolved.
X and Y are co-owners of a house let to a tenant. X and Y divide the net rents after deduction of the incidental taxes; etc. X and Y who are the co-owners of the aforesaid house use the house as a hotel managed either by themselves or by a duly appointed manager for their common proit. X and Y buy bales of cotton, agreeing to share the same between them.
X and Y agree to work together as carpenters but X shall receive all proit and shall pay wages to Y. X and Y are joint owners of a ship. X, a publisher, agrees to publish at his own expense a book written by Y and to pay Y half the net proit. X and Y purchase 10, bags of cement which they agree to sell for their joint account. Are the members of a Hindu undivided family, carrying on a family business as such, partners in such business?
On attaining majority a a minor cannot become a partner, b he can become a partner at any time, c he can become a partner within 6 months. Which statement is correct? Is it compulsory for a minor who has attained majority to give public notice that he has elected either to become or not to become a partner in the irm?
If, on attaining majority, he fails to give public notice referred to above a he shall become personally liable, b he shall not become personally liable, to third parties for all the acts of the irm done since he was admitted to the beneits of partnership. When a partner makes advances to the irm over and above the amount of capital to be contributed by him, can he claim interest thereon?
A and C carry on partnership business as merchants trading between Bombay and London. D, a merchant in London, to whom they send their consignments secretly allow C a share of the commission which he received upon such consignments in consideration of C using his inluence to obtain the consignments for him. Is C liable to account to the irm for the moneys so received by him? A, being a partner in a irm of solicitors, draws a bill of exchange in the name of the irm without authority.
Are the other partners liable? In case of torts, partners a are liable, b are not liable, jointly and severally for wrongful acts committed by a partner acting in the ordinary course of the partnership business. State which is correct? Suppose, A is not a partner in a particular irm. But he represents himself or knowingly permits himself to be represented as a partner in that particular irm to B who on the faith of such representation, gives credit to the irm.
Is A liable as partner in the irm on any principle? Can a share in a partnership be transferred like any other property? Which is correct? X, Y and Z are partners, Z who is in active partnership retires without giving public notice of his retirement.
X and Y in carrying on old business incurred a liability towards M. Is Z also liable to M? P, Q and R are partners. R is a sleeping partner who has not been known by creditors to be partner of P and Q. R retires without giving public notice of his retirement. Is R liable for subsequent debts incurred by P and Q?
Is registration of irms compulsory in India? A, B and C are partners in a manufacture of machinery. Will this claim sustain? X, Y and Z are partners. Z who is an active partner retires without giving public notice of his retirement. Will Z be liable for the subsequent debts of the irm? A and B are solicitors in partnership.