Partnership Act

Partnership Act

A partnership is the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting or all. In India it is governed by the Indian Partnership Act, 1932, which extends to the whole of India except the State of Jammy and Kashmir. It came into force on 1st October 1932.
ELIGIBILITY

A partnership agreement can be entered into between persons who are competnet to contract. Every person who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject can enter into a partnership.
The following can enter into a partnership
1. INDIVIDUAL
2. FIRM
3. HINDU UNDIVIDED FAMILY
4. COMPANY
5. TRUSTEES

1. INDIVIDUAL: An individual, who is competent to contract, can become a partner in the partnership firm. If there are more than two partnes in a firm, an individual can be a partner in his individual capacity as well as in a representative capacity as Karta of the Hindu undivided family.
2. FIRM: A partnership firm is not a person and therefore a firm can not enter into partnership with any firm or individual. But a partner of the partnership firm can enter into partnership with other persons and he can share the profits of the said firm with his other co-partners of the parent firm.
3. HINDU UNDIVIDED FAMILY: A karta of the Hindu undivided family can become a partner in a partnership in his individual capacity, provided the member has contributed his self acaquired or personal skill and labour.
4. COMPANY: A company is a juristic person and therefore can become a partner in a partnership firm, it is authorised to do so by its objects.
Indian Contract act, 1872 Trustees of private religious trust, family trust and trustees of Hindu mutts or other religious endowments are juristic persona dncan therefore enter into partnership, unless their constitution or objects forbid.

NUMBER OF PARTNERS
The number of partners in a firm shall not exceed 20 and a partnership having more than 20 persons is illegal. When there is a partnership between two firms, all the partners of each firm will be taken into account. If the partnership is between the Karta or member of Hindu undivided family the members of the joint Hindu family will not be taken into account.

ESSENTIAL OF A PARTNERSHIP
I. AGREEMENT: The relationship between partnes arises from contract and not status. If after the death of sole properitor of a firm, his heirs inherit frim they do not become partners, as there is no agreeemnt between them.
ii. SHARING OF PROFITS: The partners may agreee to share profits out of partnership business, but not share the losses. Sharing of losses is not necessary to constiture the partnership. The partners may agree to share the profits of the business in any way they like.
iii. BUSINESS: Business includes every trade, occupation, or profession. There must be course of dealings either actually continued or contermplated to be continued with a profit motive and not for sport or pleasure.
iv. RELATION BETWEEN PARTNERS: The partners while carrying on the business of the partnership acts a principle and an agent. He is a principal because he acts for hiself, and he is an agent as he simultaneously acts for the rest of the partners.

GENERAL DUTIES OF A PARTNER
Subject to a contract to the contrary between the partners the following are the duties of a partner.
1. To carry on the business of the firm to the gretest common advantage. Good faith requires that a partner shall not obtain a private advantage at the expense of the firm. Where a partner carries on a rival business in competition with the partnership, the other partners are entitled to restrain him.
2. To be just and faithful. Partnership as rule is presumed to be based on mutual trust and confidence of each partner, not only in the skill and knowledge, but also in the integrity, of each other partner.
3. To render true accounts and full information of all things done by them to their co-partners.
4. To indemnify for loss caused by fraud. Every partner shall indemnify the firm for loss caused to it by his farud in the conduct of the business of the firm.
5. Not to carry on business competiting with the firm. If a partner carries on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all profits made by him in that business.
6. To indemnify the firm for wilful neglect of a partner. A partner shall indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm.
7. To carry out the duties created by the contract. The partners are bound to perform all the duties created by the agreement between the partners.

RIGHTS OF THE PARTNERS
Subject to a contract to the contrary a partner has the following rights.
1. To take part in the conduct and management of the business.
2. To express opinion in matters connected with the business. He has a right to be consulted and heard in all matters affecting the business of the firm.
3. To have free access to all the records, books of account of the firm and take copy from them.
4. To share in the profits of the business. Every partner is entitled to share in the profits in promotion agreed to between the parties.
5. To get interest on the payment of advance. Where a partner makes for the purpose of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, he is entitled to interest thereon at the rate of 6% per annum.
6. To be indemnified by the firm against losses or expenses incurred by him for the benefit of the firm.

RESTRICTIONS ON AUTHORITY OF A PARTNER
Restrictions are governed by Contract any by the Partnership Act
The partners may be contract extend or restrict the impled authority of any partner.
Under the Partnership Act in the absence of any usage of trade to the contrary, the implied authority of a partner does not empower him to do the following acts:
a. Submit a dispute relating to the business of a firm to arbitration
b. Open a bank account his own name
c. Compromise or relinquish any claim of the firm
d. Withdraw a suit or proceeding on bahalf of the firm
e. Admit any liability in a suit or proceeding against the firm
f. Acquire immovable property on behalf of the firm
g. Transfer immovable property belonging to the firm, or
h. Enter into partnership on behalf of the firm.

RIGHTS OF A MINOR
1. A person who is a minor according to the law to which he is subhect may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership.
2. Such minor has right to such share of the property and of the profis of the firm as may be agreed upon, and he may have access to and inspect and of the accounts of the firm.
3. Such monor's share is liable ffor the acts of the firm, but the minor is not personally liable for any such act.
4. Such minor may not sue the partners for an account or payment of hsi share of the property or profits of the firm.
5. At any tiem within six months of this attaining majority, or of his obtaining knowledge hat he had been admitted to the benefits of partnership, whichever date is later, such person may give public notice that he has elected to become or that he has elected not to become a partner in the firm, and such notice shall determine his position as regards the firm, provided that, if he fails to give such notice, he shall become a partner in the firm on the expiry of the said six months.
6. Where any person has ben admitted as a minor to the benefits of partnership in a firm, the burden of proving the fact that such perosn had no knowledge of such admission until a particular date after the expiryt of six months of his attaining majority shall lie on the perosn asserting that fact.
7. Where such person becomes a partner
a. his rights and liabilities as a minor continue upto the date on which he becomes a partner, but he als becomes personally liable to third parties for all acts fo the firm done suince he was admitted to teh benefits of the partnership, and
b. his share in the property and profits of the firm shall be the share to which he was entitled as a minor.
8. Where such person elects not to become a partner
a. his righs and liabilitis shall continue to be those of a minor upto the date on which he gives public notice,
b. his share shall not be liable for any acts of the firm done after the date of the notice, and
c. he shall be entitle d to sue the partners for his share of the property and profits.

DISSOLUTION OF A FIRM
A firm may be dissolved in the following manner
1. Dissolution by Court
2. Dissolution by agreement
3. Dissolution by operation of law
4. Dissolution on hte happening of certain contingenies
5. Dissolution by notice

DISSOLUTION BY COURT
The court may dissolve a firm at the suit of any partners on any of the following grounds namely:
a. INSANITY OF A PARTNER: that a partner has become of unsound mind. The insanity of a partner does not ipso facto dissolve the firm and the next friend or continuuing partners hs to file suit foe dissolution.
b. PERMANENT INCAPACITY OF A PARTNER: that a partner has become permanantly incapable of performing his duties as partner.
c. CONDUCT AFFECTING PREJUDICIALLY THE BUSINESS: that a partner is guily of conduct, which is likely to affect prejuridially the carrying on the business of the firm.
d. BREACH OF PARTNERSHIP AGREEMENT: that a partner wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of its business or other wise conducts himself in matters relating to the business, that it is not reasonalbly practical for the other partners to carry on the business with him.
e. TRANSFER OF INTEREST OF A PARTNER: that a partner has in any way transferred the whole of his interest in the firm to a third party.
f. LOSS: that he business of the firm cannot be carried on save a t aloss
g. JUST AND EQUITABLE: on any other ground that renders in just an equitable that the firm should be dissolved.

DISSOULUTION BY AGREEMENT
A firm may be dissolved with the consento f all the partners or in accordance with the contract between the partners. The partnership agreement may contain a proviso that the firm will be dissolved on the happening of certian contingecy.

DISSOLUTION BY OPERATION OF LAW
A firm is compulsorily dissolved on the following grounds
a. Insolvency of partners
b. By the happening of any evernt which makes it unlawful for the business of the firm to e carried on.

DISSOLUTION BY HTE HAPPENING OF CERTAIN CONTINGENCIES
subject to contract between the partners a firm is dissolved on the happening of the following contingencies.
a. If constitued for a fixed term, by he expiry of that term
b. If constitued to carry out one or more adventures or undertakings, by its completion.
c. By the death of a partner
d. On insolvency of a partner

DISSOLUTION BY NOTICE
If the partner is at will, the same may be dissolved by service of a notice by one partner to dissolve the firm.