INDIAN PARTNERSHIP ACT

MAINS QUESTION

1. Discuss the mutual rights and liabilities of partner’s inter se.

 

2. ‘X’ and ‘Y’ are partners in a trading firm. X borrows Rs. 9000from P and executes a pronote in the name of the firm. ‘X’ spends the money in purchasing a plot of land in his own name for his personal purposes. Can P hold Y also liable for debt? Give reasons.
3. “Relation of partners to one another are based upon the principle of absolute good faith “. Amplify with reference to the duties of partners.

 

4. What are the rights of partner in the management and conduct of the business of a firm ? Can a firm be restrained from carrying on any business other than that of the partnership while he is a partner?

 

5. In a partnership firm, there are three partners- A, B and C, Who have invested Rs 10,000 , Rs 20,000 and Rs 30,000 respectively in the business of the firm. According to the partnership agreement, the liability of every partner towards the debts of the firm has been fixed in proportion of the capital invested by him. Business suffers losses and no capital is left with the firm. In a meantime B becomes insolvent. In which proportion will the payment of the loan of Rs. 80,000 payable by firm will be made by each partner? Stating briefly the rules regarding the settlement of accounts amongst partners, give the solution of the above stated problem .

 lecture notes

Relation of partners to one another

 What are the GENERAL DUTIES OF PARTNERS?

 

Section-9

 Partners are bound to carry on the business of the firm to greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner, his heir or legal representative.

 

What are the Rights and liabilities between partners?

 

1. Rights

 

1. Right to take part in the Management

 

2. Right to be consulted and heard

 

3. Right to free access to all records

 

4. Entitled to share in the profits

 

5. Right to indemnity

 

6. Right to own partnership property jointly

 

7. Right to act in emergency

 

8. Right to retire

 

9. Right not to be

 

What are the Liabilities ?

 

1. To carry on the business of the firm to the common advantage.

 

2. To render true accounts and full information of all things affecting the firm, to other partner or his legal representatives.

 

3. Every partner is liable to indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm,

 

4. Every partner is bound to attend diligently to his duties in the conduct of the business of the firm.

 

5. Liability to indemnify firm for any loss caused to it by wilful neglect of a partner in the conduct of the business of the firm.

 

6. In the absence of a contract to the contrary, every partner is liable to contribute equally to losses sustained by the firm.

 

7. To hold and use the property of the firm exclusively for the purposes of the business of the firm.

 

8. A partner is liable to account for and pay to the firm for any profits derived by him for himself from any transaction of the firm from the use of the property or business connection of the firm or the firm name.

 

9. In case a partner carried on business of the same nature as and competing with that of the firm, he shall be liable to account for and pay to the firm all profits made by him in that business.

 

10. A partner is liable to account for any losses ensuing from any act committed by him outside the scope of the actual authority conferred upon him.

 

What are the ways of determining the rights and duties of partners?

By the contract between the Partners.

The principles governs the relation of partners are

1. One gives the freedom to settle the mutual rights and duties of partner
2. Second of absolute good faith.

 

PAHUJA LAW ACADEMY

Pre Questions

 

1. Mark the incorrect statement:

(a) The mutual rights and duties, which have been agreed upon, may be subsequently varied by the consent of all the partners (Sec. 11).

(b) In case of any conflict between the provisions of the Partnership Act and those of the partnership agreement, the agreement will prevail.

(c)  Sections 9 and 10 of the Partnership Act contain certain duties by which all the partners are bound and those duties cannot be negative by a contract between the partners.

(d)  Sections 12 to 17 contain various other mutual rights and duties of the partners, which have been made “subject  to the contract between the partners”.

 

2. Which of the following is not a mutual duty of a partner?’

(a)  Duty of utmost good faith i.e. uberrimae fide.

(b) Duty to carry on business to greatest common advantage.

(c) Duty to render true accounts and full information.

(d) Duty to contribute funds or capital for” the firm’s business.

 

3. Mark the correct statement:

(a) A partner can make a personal profit out of the firm’s business, if , there has been no detriment to the firm.

(b) A partner can make a personal profit out of the firm’s business.

(c) A partner cannot make a personal profit out of the firm’s business.

(d) None of the above

 

4. A partner has a duty to:

(a) Indemnify the firm for any loss caused to it by his fraud.

(b) indemnify the firm for any loss caused to it by his willful neglect.

(c)  Both (a) and (b)

(d) Only (a)

 

5. General duties of partners have been laid down in :

a) section 9 of the act

b)section 10 of the act

c) section 11 of the act

d) section 13 of the act

 

6. Under section 9 of the Indian partnership Act, 1932 in doing best for the common body

a) a partner is regarded as a kind of trustee for the other partners

b) a partner is liable to render the accounts to other partners in a fiduciary capacity

c) both (a) and (b)

d) neither (a) nor (b)

 

7. The mutual rights & duties of the partners are to be determined by :

a) Their mutual agreement

b) The provisions of the partnership Act.

c) Mutual agreement subject to the provisions of the partnership Act

d) none of above

 

8. Mark the incorrect statement :

a) A partner can make a personal profit out of the firm’s business, if there has been no detriment to the firm

b) A partner can make a personal profit out of the firm’s business.

c) A partner cannot make a personal profit out of the firm’s business

d) None of the above

 

9. Which of the following is a right of a partner :

i.  Right to participate in business.

ii.  Right to restrain misconduct.

iii. Right to profits.

iv. Right to express opinion or majority powers.

v. Right to interest on the capital subscribed by him.

a) I, III and IV.

b) I, II and III.

c) I, II and V .

d) All of these

 

10. Under section 9 of the Indian partnership Act , 1932 in doing best for the common body

a) a partner is regarded as a kind of trustee for the other partners.

b) a partner is liable to render the accounts to other persons

c) both (a) and (b)

d) Neither (a) nor (b)

 

Topic :- Holding Out; Minor’s position

MAINS QUESTIONS

1. Explain the doctrine of Holding Out.
2. Can a minor be admitted as partner of firm? If so can he subsequently ratify or revoke such partnership? Describe the rights and liabilities of such partner.

3. A, B and C are partners in a firm. C retires from the firm under agreement with A and B that all assets and liabilities of the firm will be of A and B. ‘D’ a creditor of the firm sues A, B and C. C refers to the agreement with A and B and denies liability to D. Discuss the liability of C.

4. Determine the existence of partnership in following –

‘A partnership firm was financially embarrassed and therefore made a compromise with their creditors B , C , D and E . Under the compromise the property of the firm was assigned to all the four creditor. They were empowered to carry on business, to share the profits among themselves, till the debts have been discharged.

5. Explain the effects of the minor dropping out of the firm on attaining majority as per section 30 of the Indian partnership Act 1932.

 

PAHUJA LAW ACADEMY 

LECTURE NOTES

Topic :- Holding Out; Minor’s position

 

• S/28 Holding out partner [also a case of legal fiction

Based on principle of Estoppel

• Intention Immaterial
• Leading case :- Tower cabinet Co.V. Ingram.

 

• S/32 (3) also deals with holding out if public notice is not given of retirement, retired partner can be held liable.
• Sec 32 (3) is an exception to S/25
• Leading case:- Scarf v. Jardine [1882]

 

• S/30 (9) also deals with Holding
• This will not affect S/28

PAHUJA LAW ACADEMY

Pre Questions

1. A person who is” not a partner in any firm may, under certain circumstances, be liable for tile debts as if he were a partner on the basis of the doctrine of estoppel’ or ‘holding out’. This is laid down in which section of the Partnership act:

(a) Sec. 26.

(b) Sec. 27.

(c) Sec. 28

(d) Sec. 29

 

2. Representation under Sec. 28, by a person to be a partner of the firm: –

(a) May be by words, spoken or written, or by conduct.

(b) Should be made by himself or knowingly permitted by him to be made by someone else.

(c) Should be in the knowledge of the person acting on its faith and believed by him to ‘be true

(d) All are correct

 

3. A firm consists of A, B and C. D, who is not a partner, makes a representation to X that he is also- a partner and on the faith of this representation X gives credit to the firm</li>

(a) X can make D liable on the basis of holding out.

(b) D is estopped from denying that he is a partner in the firm.

(c) A, B and C will be liable for D’s act.

(d) Both (a) and (b).

 

4. A partnership consisted of A and B which was dissolved by retirement of B and thereafter the business was carried on by A alone. A used an old notepaper of the firm bearing the names of both A and B and placed an order for the purchase .of some furniture from a company, the price for which was never paid. The company sued B to make him liable on the basis of doctrine of holding out

(a) B is not liable

(b) B is liable

(c) B is not liable because A made representation without B’s knowledge and without his authority

(d) Both A and B are liable

 

5. Which of the following is not a leading case on the doctrine of holding out?

(a) Tower Cabinet C0. v Ingram

(b) Scarf v Jardine

(c) Both (a) and (b)

(d) neither (a) and (b)

 

6. A minor who has admitted under the concession extended by section 30 of the Indian Partnership Act into the benefits of a firm has

a.  No right to examine the books

b.  A right to examine the accounts books only

c.  A right to examine all the books or papers

d.  None of the above

 

7. A person who is not a partner in any firm may, under certain circumstance , be liable for the debts as if he were a partner on the basis of the “doctorine of estoppel “ and “ holding out “ . This is laid down in which section of the partnership Act :

a) Section 26

b) Section 27

c) Section 27

d) Section 28

 

8. Representation under Section 28, by a person to be a partner of the firm:

a) May be by words , spoken or written , or by consent .

b) Should be made by himself or knowingly permitted by him to be made by someone else.

c) Should be in the knowledge of the person acting on its faith and believed by him to be true .

d) All are correct.

 

9. Which of the following is not a leading case on the doctrine of holding out.

a) Snow White Food Products (P) ltd. V. Sohan Lal Bagla.

b) Tower Cabinet co. V Ingram.

c) Scarf V. Jardine

d)Trimble V. Goldberg.

10. In a firm consisting of A and B , a minor was admitted to the benefits of partnership . The firm had dealing with the C’s concern and it became indebted to them. After that , the partnership was dissolved . Subsequently, the minor attained majority, but he did not exercise an option under section 30(5).

a) The minor could be made liable since by failing to exercise the option within 6 months from the date of his majority, he had became a partner.

b) The minor could not be liable, as when he attained majority the firm had already been dissolved.

c) Section 30 presupposes the existence of a partnership.

d) Both (b) and (c)

 

PARTNERSHIP ACT  

Dissolution of Firm

Mains Question

 

 

1. Explain and illustrate the grounds on which firm may be dissolved by the court.

2. A, B and C enters into partnership. After some time ‘C’ is adjudged as an insolvent. Is the firm dissolved?

3. A partner commits adultery with the wife of another partner. Whether the liable to be dissolved?

4. Ajay and Binny are partners in running a fast shop. The Partnership agreement does not contain any clause as to its duration. The partnership agreement does not contain any clause as to its duration. It also does not contain any clause as to its duration. It also does not contain any clause spelling out the conditions on which the partnership may be determined. Ajay institutes a suit on 10.05.2013 for dissolving the partnership firm. Binny objects to the suit saying that Ajay has not given any notice to him in relation to his intention of dissolving the firm. The contention of Ajay is that the institution of the suit is sufficient notice.

Decide the matter as to the date on which the firm would be dissolved and also comment on whether the court has the power to set any date other than 10.05.2013 as the date on which the firm would be dissolved.

5. A and B enter into a partnership for a period of 15 years. B pays a sum of Rs. 16000 to A as premium long before the expiry of 15 years. A is adjudged bankrupt. B claims re-fund of proportionate premium which he has paid to A. Decide.

PAHUJA LAW ACADEMY

LECTURE NOTES

PARTNERSHIP ACT

Dissolution of Firm

Based on Delicto Persona

• Dissolution by Court [Section 44]
• Statutory ground for dissolution
• Court is not bound to dissolve
• Right to sue under this section is not subject to contract

Right and obligation of partners after dissolution

• Section 45 – Partners continue to liable until public notice
• Section 46 – Right to have the business wound up after dissolution
• Section 47 – Rights and obligation continue with respect to transaction began but unfinished at

the time of dissolution.

• Section 50 – Account for personal profits after dissolution but before winding up.

Section 51 – Return of premium on premature dissolution

PARTNERSHIP ACT  

Dissolution of Firm

Pre Questions

 

 

1. Dissolution of a firm has been defined under

a.  section 39 of the Act

b.  section 38 of the Act

c.  section 41 of the Act

d.  section 40 of the Act.

 

2. Section 40 of the Indian Partnership Act, provides for

a.  dissolution by court

b.  dissolution by notice

c.  dissolution by agreement

d.  compulsory dissolution.

 

3. Compulsory dissolution of a firm has been provided under

a.  section 42 of the Act

b.  section 41 of the Act

c.  section 44 of the Act

d.  section 43 of the Act.

 

4. Under section 41 of the Indian Partnership Act, 1932, a firm is liable to be compulsorily dissolved on the ground of

a.  insolvency

b.  illegality of business

c.  both (a) and (b)

d.  either (a) or (b).

 

5. The type of dissolution provided under section 43 of the Indian Partnership Act, 1932 is

a.  dissolution by court

b.  dissolution by notice

c.  dissolution by agreement

d.  dissolution by insolvency.

 

 

6. The notice of intention to dissolve the firm, under section 43 of the Act, must be

a.  in writing

b.  a verbal communication

c.  either (a) or (b)

d.  only (a) and not (b).

 

7. A suit for dissolution of a firm on the ground of permanent incapability of a partner, under section 44(b) of the Act can be filed by

a.  any partner including the partner who has become permanently incapable

b.  any partner, other than the partner who has become permanently incapable

c.  the partner who has become permanently incapable only

d.  only (a) and not (b) or (c).

 

8. Misconduct of a partner is a ground on which the court can order dissolution of a firm, as provided under

a. section 44(b) of the Act

b.  section 44(c) of the Act

c.  section 44(d) of the Act

d.  section 44(g) of the Act.

 

9. The remedy of a co-owner against other owner is :

a. To sue for dissolution

b. to sue for partition

c. Either (a) and (b)

d. None of these

 

10. “Where a firm is constituted for a fixed term , it becomes dissolved on the expry of that term , it becomes dissolved on the expiry of that term, unless the dissolution is prevented by an agreement between the partners.

a. false

b. true

PAHUJA LAW ACADEMY

Topic: Registration of Firms

Mains Questions

 

 1.Examine the correctness of the following statement: Registration of firm though not compulsory is practically necessary.

 

2. ‘A’, ‘B’ and ‘C’ are partners in an unregistered firm. A is wrongfully expelled from the firm by ‘B’ and ‘C’. ‘A’ files a suit against ‘B’ and ‘C’ for declaration that he has been wrongly expelled from the firm and that he continues to be partner in the firm. How will you decide?
3. A premises was let out to a firm at a monthly rent of Rs. 3450/- . The partnership firm filled a petition for Fixation of standard rent. During trial it was found that the firm is unregistered. Whether the petition is liable to be dismissed? Give reason.
4. Explain the term “PERSONS SUING” covered under section 69(2) of the Indian Partnership Act 1923.
5. P, Q and R are partners in a firm. R retires from firm under agreement with P and R that all assets and liabilities of the firm will be that of P and Q. D, a creditor of fir sued P,R and Q. R refers to agreement with P and Q and denies liability to D . Discuss the liability of R .

 

 

PAHUJA LAW ACADEMY

lecture notes

Topic: Registration of Firms

 

• Section 56

Power to exempt from application of this section

• Section 57

 

Appointment of Registration

 

• State government – appoint Registrars
• Registrar – deemed to be a public servant within the meaning of Section 21 of Indian Penal Code, (IPC) 1860.

 

• Section 58

Application for Registration

Application may be send at any time by post to the Registrar, accompanied by prescribed fee stating.

• Firm name
• Place or principal place of business
• Name of other place where firm carries on business
• Date when each partner joined
• Full names and permanent addresses of the partners
• Duration of the firm

 

 

• Section 60

Recording of alterations in firm name and principal place of business

• Section 62

• Section 63

• Section 64

• Section 65

• Section 68

Rules of Evidence

• Section 69

Effect of Non Registration

• This section came into force on 1^st October, 1933
• Under old Law (ICA) – no provision for registration
• Though registration is optional – but disadvertages attached with non-registration – make it compulsory.

 

• Exceptions to Section 69

 

• Act not extended or exempted Under Section 56
• Value of Suit / Set off does not exceed Rs.100
• Execution proceedings or other incidental proceeding
• Action for dissolution, Accounts of dissolved firm, realize the property of dissolved firm
• Suit by 3^rd party
• Statutory or non- Contractual Rights

 

 

 

LECTURE – 5

 

Topic: Registration of Firms

Pre Questions

 

1. Which chapter of the Partnership Act deals with the registration of partnership firms:

(a) Chapter VI

(b) Chapter VII

(c) Chapter VIII

(d) Chapter IX

 

2. An application for registration of a firm is not required to contain:

(a) The duration of the firm

(b) Signature of all the partners

(c) The date when each partner joined the firm

(d)Specific shares of the partners of the firm

 

3. Under the Partnership Act, the registration of a firm is:

(a) Compulsory

(b) Optional

(c) Optional but there are penalties for non-registration

(d) None of the above

 

4. Section 69 of the Partnership Act makes registration of a firm mandatory for the purposes of:

(a) Suits

(b) Arbitration

(c) Dissolution

(d) All of the above

 

5. Section 69 shall not apply to:

I .Firms or to partners in firms which have no place of business in the territories to which this Act extends

II. Any suit or claim of set-off not exceeding one hundred rupees in value

III. An action brought on behalf of an insolvent partner against an unregistered firm

IV . Joint Hindu families carrying on business

(a) I, II and III

(b) I, II and IV

(c) I, III and IV

(d) I, II, III and IV

 

6. Which of the following sections of The Indian partnership Act 1932 deals with the procedure for the registration of a firm.

a. sections 57 & 58

b. sections 58 & 59

c. sections 56 to 71

d. section 59

 

7. “If a partner refuses to sign the application form, registration can be obtained only by dropping his name from the firm “True Under section 63, Indian Partnership Act, 1932 prescribes that _____ is the   period of limitation either for the original registration , or recording of subsequent changes .

a. from 4 months of its formation .

b. from 11 months of its formation.

c. No time period .

d. from 1 year of its formation .

 

8. Which of the section of The Indian Partnership Act , 1932 deals with the imposition of penalties for furnishing false particulars .

a.Section 71

b.Section 70

c.Section 56

d. Section 58

9. X and Y are the partners in an unregistered firm, submitted an application to the registrar of firm for the registration of their firm on 1^st July 1995. The firm filled a suit on the same date against D for the recovery of Rs. 10,000, being the price for goods supplied by the firm to D on credit. The suit was parted for hearing on 10^th August 1995. The organization certificate was issued by the Registrar on 29^th July 1995. Is the suit maintainable?

a.The suit in maintainable under section 62 of the Act.

b. The suit in maintainable under section 69 of the Act.

c. The suit is maintainable under section 64 of the Act.

d. The suit is not maintainable under section 69 of the Act.