Partnership lectures

Partnership lectures

 

PAHUJA LAW ACADEMY

Indian Partnership Act – 1932

Lecture – 1

 

Mains Questions

 

  1. “Partnership is the relationship between persons who have agreed to share the profits of business carried on by all or any of them acting for all”. Discuss.

 

  1. Sharing of Profit is prima facie evidence of partnership not the conclusive proof. Discuss with reference to case law and provisions of Indian Partnership Act.

 

  1. What do you understand by implied authority? Can it be extended or restricted.  

 

  • Before the passing of this Act, the law relating to Partnership was contained in the Indian Contract Act [S/239-266]
  • It is based on the English Partnership Act, 1890
  • Act is not exhaustive
  • In Partnership, there is unlimited liability of Partners
  • It is a relationship between partners.
  • It is a method to carry on business – if no business – no partnership purpose is earn profit
  • Every combination of two or more persons does not amount to partnership.
  • Partnership arises from Contract not by law [S/5]

Eg., In Hindu Joint family, one becomes member by birth ie., by aperation of law

 

  • According to Indian Partnership Act, firm is not a legal person. Losses suffered by individual partners.

 

  • Test of Partnership is mutual agency ie., every partner is an agent as well as principal of other partners.

 

  • It arises between those who have mutual trust and confidence.

 

Essentials of Partnership [S/4]

 

 

Relationship [mutual                                                Agreed                                                 Business              carried on by all or any

Trust and confidence]                                                                   Sharing of Profits                                       of them acting for all

Between 2 or more                                                                      must be in           [shows mutual agency]

Persons                                                                                existence

 

  • [S/6] Sharing of profits is not the sole test of partnership.
  • Prima facie evidence of partnership but not the conclusive proof.
  • Whether a group of person is or not a firm

Or

Whether a person is or not a partner

 

Depend – Real Relation (mutual agency)

 

 

  • Cox v. Hickman [Land Mark case]

S/6 is drafted on this Judgment

 

 

Partnership

 

                           Will [S/7]                                                                                               for Particular duration

or undertaking [S/8]

 

  • Implied authority of a partner [S/19]
  • Every partner is an agent of the firm for the purposes of the business of the firm [S/18]
  • Act of partner which is done, in the usual way, business of the

kind carried on by the firm binds the firm provided

 

done in firm name                                                              any other manner expressing

or implying intention

 

Implied authority [S/19 r/w 22]

 

  • Implied authority may differ in different kinds of business
  • Implied authority can be restricted by

 

 

Statutory restriction [S/19(2)]                                imposed by deed [S/20]

2 exception to the statutory

Exceptions

  • Customs
  • Usage of trade

 

  • Unusal Act are allowed in cases of emergency [S/21]

 

 

Preliminary Questions

 

  1. Prior to the Indian Partnership Act, 1932 which came into force from 1 October, 1932 except section 69 which came into force from 1 October, 1933 the law of partnership was provided in
  • Sale of Goods Act, 1930
  • Indian Contract6 Act, 1872
  • Transfer of Property Act, 1908
  • English Partnership Act, 1890.

 

  1. An act, to be called on act of a firm, within the meaning of section 2(a) of the Indian Partnership Act, 1932 is
  • Every act of the partners
  • Only such acts which give rise to a right enforceable by or against the firm
  • Such acts which do not give rise to a right enforceable by or against the firm
  • Either (a) or (b) or (c)

 

  1. Any act or omission, to be an act of a firm, within the meaning of section 2 (a) of the Indian Partnership Act, 1932 must be act or omission of
  • All the partners
  • Any of the partner
  • Agent of the firm
  • Either (a) or (b) or (c)

 

  1. The term ‘business’ has been defined under
  • Section 2(a)
  • Section 2(b)
  • Section 2(d)
  • Section 2 (e)

 

  1. Under section 2(b) of the Indian Partnership Act, business includes
  • Every trade and occupation
  • Every occupation and profession
  • Every trade, occupation and profession
  • Every trade and profession.

 

  1. The term ‘partnership’ has been defined under
  • Section 3
  • Section 4
  • Section 5
  • Section 6.

 

  1. Under section 4 of the Indian Partnership Act, partnership is a
  • Compulsory legal relation
  • Creation of the choice and voluntarily agreement between the concerned parties
  • A relation arising from status
  • Either (a) or (b) or (c)

 

  1. A partnership can be
  • A general partnership
  • A particular partnership
  • Either (a) or (b)
  • Only (a) and not (b).

 

  1. The relation of partnership arises from contract and not from status, has been prescribed under
  • Section 4
  • Section 5
  • Section 6
  • Section 7

 

  1. Section 7 of the Indian partnership Act provides for
  • Partnership in a particular adventure or undertaking
  • General partnership
  • Partnership at will
  • All the above.

 

  1. A partnership firm is
  • A distinct legal entity from its partners
  • Not a distinct legal entity from its partners
  • A juristic person
  • Either (a) or (c).

 

  1. The historic case laying down the test for determining the existence of a partnership is
  • Grace V. Smith
  • Waugh V. Carver
  • Bloream V. Pell
  • Cox V. Hickman.

 

  1. The mode of determining the existence of partnership has been laid down in
  • Section 6
  • Section 5
  • Section 9
  • Section 10

 

  1. Which of the following is not an essential requisite for creating a partnership as per section 4
  • An agreement to carry on a business
  • Sharing of profits
  • Sharing of losses
  • Business to be carried by all or any of them acting for all.

 

  1. A partnership for which no period or duration is fixed, under the Indian Partnership Act, 1932 is known as
  • General partnership
  • Partnership at will
  • Particular partnership
  • Co-ownership.

 

  1. The minimum number of persons required for a partnership is
  • Two
  • Five
  • Ten

 

  1. The scope of implied authority of a partner under section 19 of the Indian Partnership Act is linked with
  • The kind or nature of the business
  • The usual manner of carrying on the business
  • Both (a) and (b)
  • Only (b) and not (a).

 

  1. Under section 19 a partner has an implied authority to
  • Compromise any claim or a portion of a claim by the firm
  • Relinquish any claim or a portion of a claim by the firm
  • Both (a) and (b)
  • Neither (a) nor (b).

 

  1. A partner has no implied authority
  • To enter into a partnership with other persons in another business
  • To borrow money in case of a commercial firm
  • Both (a) and (b)
  • Neither (a) nor (B).

 

  1. Section 19(2) of the Indian Partnership Act, 1932 provides for
  • Statutory restrictions on the partners implied authority
  • Contractual restriction on the partner’s implied authority
  • Both (a) and (b)
  • Neither (a) or (b).

 

PAHUJA LAW ACADEMY

Lecture – 2

INDIAN PARTNERSHIP ACT

 

MAINS QUESTION

 

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

 

  1. ‘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.

 

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

 

  1. Right to be consulted and heard

 

  1. Right to free access to all records

 

  1. Entitled to share in the profits

 

  1. Right to indemnity

 

  1. Right to own partnership property jointly

 

  1. Right to act in emergency

 

  1. Right to retire

 

  1. Right not to be

 

What are the Liabilities ?

 

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

 

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

 

  1. 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,

 

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

 

  1. 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.

 

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

 

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

 

  1. 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.

 

  1. 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.

 

  1. 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.

 

Pre Questions

 

 

  1. Mark the incorrect statement:
    • The mutual rights and duties, which have been agreed upon, may be subsequently varied by the consent of all the partners (Sec. 11).
    • In case of any conflict between the provisions of the Partnership Act and those of the partnership agreement, the agreement will prevail.
    • 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.
    • 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”.

 

  1. Which of the following is not a mutual duty of a partner?’
    • Duty of utmost good faith i.e. uberrimae fide.
    • Duty to carry on business to greatest common advantage.
    • Duty to render true accounts and full information.
    • Duty to contribute funds or capital for” the firm’s business.

 

  1. Mark the correct statement:
    • A partner can make a personal profit out of the firm’s business, if , there has been no detriment to the firm.
    • A partner can make a personal profit out of the firm’s business.
    • A partner cannot make a personal profit out of the firm’s business.
    • None of the above

 

  1. A partner has a duty to:
    • Indemnify the firm for any loss caused to it by his fraud.
    • indemnify the firm for any loss caused to it by his willful neglect.
    • Both (a) and (b)
    • Only (a)

 

 

Lecture – 3

PAHUJA LAW ACADEMY

 

Topic :- Holding Out; Minor’s position

MAINS QUESTIONS

 

  1. Explain the doctrine of Holding Out.

 

  1. 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.

 

  1. 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.

 

 

Topic :- Holding Out; Minor’s position

 

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

Based on principle of Estoppel

Requirements

Anyone                firm [existence]                                     to be partner                        Liable to anyone      Who gives credit

To the firm on that

Representation

Represents

 

By himself               Expressly                 Impliedly              by other, with his

Permission

 

  • 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
  • S/45 deals with Holding out in case of dissolution, if public notice is not given

 

Partners continue to be liable

 

  • 33 (2) Holding out also applies on expelled partner.
  • S/30 Position of Minor
  • He cannot be a partner

 

But can be admitted to the benefits of partnership

 

Method of admission

 

with the consent of all the partners

 

Property

  • Share                                                          as per the agreement

Profits

 

 

Position after admission

 

 

Before attaining majority                                                                              after attaining majority

[S/30 (5)]

 

Rights                                                            Liabilities                                             to become a                                       not to be a

  • S/30 (2) 30 (3)                                      partner                                                partner
  • S/30 (4)                                                                                                                                                                                         S/30 (8)

Share liable                                                  Consequence

S/30 (7)

No personal liability

Share profit

Property

Access Accounts

Inspect Accounts

Copy of Accounts

Sue firm

 

When severs his connection with the firm

 

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

 

  1. 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

 

  1. 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

(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).

 

  1. 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

 

  1. 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)

 

  1. A minor who has admitted under the concession extended by section 30 of the Indian Partnership Act into the benefits of a firm has
  • No right to examine the books
  • A right to examine the accounts books only
  • A right to examine all the books or papers
  • None of the above

PAHUJA LAW ACADEMY

PARTNERSHIP ACT

Lecture – 4


Dissolution of Firm

 

Mains Question

 

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

 

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

 

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

 

 

PAHUJA LAW ACADEMY

PARTNERSHIP ACT

Lecture – 4

 

Dissolution of Firm

 

  • 5 modes of Dissolution are provided in the Act


Voluntary                                                      Involuntary                                        Contingency

Section 40 and Section 43                       Section 41 and Section 44             Section 42

Dissolution by Contract                           Dissolution by Law                           Dissolution can be

Prevented by the Contract

Cannot be prevented

by Contract

 

  • Dissolution Under Section 40

 

Consent of all the partners                                           in accordance with a Contract

 

 

Partnership can be mutually dissolved

  • Section 43, Where partnership at will [r/w S/7]

 

Dissolve by any partner

 

At any time                         Notice in writing               to all the partners

  • Section 42 Dissolution on certain contingency

 

  • Starts with “Subject to Contract”

Firm will dissolve on

 

Expiry of fixed term         expiry of fixed                    on the death of a              on insolvency of

adventure                           partner                                 a partner

 

  • Based on Delicto Persona

 

  • Section 41 Compulsory Dissolution

 

 

By adjudication of all or                                                                 Subsequent event which makes

All but one as insolvent

[r/w 42(d) and 34]

Business unlawful            carrying on business

becomes unlawful

 

It two part

 

One lawful                          Unlawful

 

  • 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

Grounds

  • Unsoundness
  • Permanently incapable
  • Misconduct
  • Persistent breach of agreement
  • Transfer of interest
  • Perpetual loss
  • Any other ground [Residerary clause]

 

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
  • Section 52 – Rights where partnership rescinded for fraud

 

Party rescinding entitled

Lien                    Rank as creditor                                indemnity

 

  • Section 53 – Restriction on carrying on similar business
  • Section 54 – Agreement in restraint of trade
  • Section 55 – Sale of goodwill after dissolution

 

PAHUJA LAW ACADEMY

PARTNERSHIP ACT

Lecture – 4

 

Dissolution of Firm

Pre Questions

 

  1. Dissolution of a firm has been defined under
    • section 39 of the Act
    • section 38 of the Act
    • section 41 of the Act
    • section 40 of the Act.

 

  1. Section 40 of the Indian Partnership Act, provides for
    • dissolution by court
    • dissolution by notice
    • dissolution by agreement
    • compulsory dissolution.

 

  1. Compulsory dissolution of a firm has been provided under
    • section 42 of the Act
    • section 41 of the Act
    • section 44 of the Act
    • section 43 of the Act.

 

  1. Under section 41 of the Indian Partnership Act, 1932, a firm is liable to be compulsorily dissolved on the ground of
    • insolvency
    • illegality of business
    • both (a) and (b)
    • either (a) or (b).

 

  1. The type of dissolution provided under section 43 of the Indian Partnership Act, 1932 is
    • dissolution by court
    • dissolution by notice
    • dissolution by agreement
    • dissolution by insolvency.

 

  1. The notice of intention to dissolve the firm, under section 43 of the Act, must be
    • in writing
    • a verbal communication
    • either (a) or (b)
    • only (a) and not (b).

 

  1. 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
    • any partner including the partner who has become permanently incapable
    • any partner, other than the partner who has become permanently incapable
    • the partner who has become permanently incapable only
    • only (a) and not (b) or (c).

 

  1. Misconduct of a partner is a ground on which the court can order dissolution of a firm, as provided under
    • section 44(b) of the Act
    • section 44(c) of the Act
    • section 44(d) of the Act
    • section 44(g) of the Act.

 

 PAHUJA LAW ACADEMY

LECTURE – 5


Topic: Registration of Firms

Mains Questions

 

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

 

 

  1. ‘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?

 

 

PAHUJA LAW ACADEMY

LECTURE – 5


Topic: Registration of Firms

 

  • Þ Section 56

Power to exempt from application of this section

State Government

 

Exempt

 

Provision of this chapter

 

State                                            any part of the state

 

  • Þ 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.

 

  • Þ 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

 

The statement shall be signed by

 

All the partners                 or                            by their agent

 

Shall also be verified

 

  • The firm name shall not contain words like “Crown”, “Emperors”, “Empress”, “Empire”, “King” etc. expressing the patronage of government

 

Except with the consent of State Government in writing

 

 

  • Þ Section 60

 

Recording of alterations in firm name and principal place of business

 

Any such alteration shall be sent to the registrar

 

Accompanied by fees                                     signed and verified by partners

 

Registrar                   Amend and file it

 

  • Þ Section 61

 

Noting of closing and opening of branches [not being its principal, place of business]

 

Any partners                      or                            agent of the firm

 

Intimation to the Registrar

 

 

  • Þ Section 62

 

Noting of changes in names and addresses of partners

 

Any partners                      or                                    agent

 

Intimation to the Registrar

 

 

  • Þ Section 63

Recording of changes in and dissolution of a firm

 

Changes regarding constitution                       Dissolution

 

Any partner or agent or person [specially authorised]

 

Specifying the date of such changes or dissolution

 

Recording of withdrawal of a minor, whether he chooses to become

Or

Not to become

 

He                                                                   his agent

 

Notice to Registrar

 

 

  • Þ Section 64

Rectification of mistakes

 

Suo moto                                                           on application

 

At all times

 

  • Þ Section 65

Amendment of Register by order of Court

(Consequential upon its decision)

 

Registrar shall amend accordingly.

 

  • Þ Section 66

Inspection of Register and filed documents

 

By any person on payment of fees

 

  • Þ Section 67

Grant of Copies

 

On application of any person

 

 

Certified copy             on payment of fees

 

  • Þ Section 68

 

Rules of Evidence

 

  • Statement in register

 

Conclusive proof of fact stated therein

 

  • Certified copy           shall be produced in proof

 

Registration                                        Contents

 

  • Þ Section 69

 

Effect of Non Registration

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

 

  • Clause (1) No suit to be filed

 

Partner                                 alleged                                 past partner

 

                                Against

 

Any Partner                                        Firm

 

In respect of

 

Right arising from Contract                          Conferred by this Act

 

  • Clause (2) No suit shall be brought

 

By firm

Against 3rd party

 

Arising from Contract

 

 

  • Clause (3) the above 2 disabilities also apply to

 

Claim of Set off                                 other proceeding arising

from Contract

 

  • 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 3rd party
  • Statutory or non- Contractual Rights

 

PAHUJA LAW ACADEMY

LECTURE – 5


Pre Questions

 

  1. Which chapter of the Partnership Act deals with the registration of partnership firms:
  • Chapter VI
  • Chapter VII
  • Chapter VIII
  • Chapter IX

 

  1. An application for registration of a firm is not required to contain:
  • The duration of the firm
  • Signature of all the partners
  • The date when each partner joined the firm
  • Specific shares of the partners of the firm

 

  1. Under the Partnership Act, the registration of a firm is:
  • Compulsory
  • Optional
  • Optional but there are penalties for non-registration
  • None of the above

 

  1. Section 69 of the Partnership Act makes registration of a firm mandatory for the purposes of:
  • Suits
  • Arbitration
  • Dissolution
  • All of the above

 

  1. Section 69 shall not apply to:
  2. Firms or to partners in firms which have no place of business in the territories to which this Act extends
  3. Any suit or claim of set-off not exceeding one hundred rupees in value
  • An action brought on behalf of an insolvent partner against an unregistered firm
  1. Joint Hindu families carrying on business
  • I, II and III
  • I, II and IV
  • I, III and IV
  • I, II, III and IV

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