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Indian Partnership Act,1932

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Essential Elements of Partnership

Essential Elements of
Partnership

a) Two or b) Agreement c) Sharing of d) Business e) Mutual
more persons Profits Agency

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TEST OF PARTNERSHIP [SECTION 6]

Cases where the Partnership Relation does not exist

a) Joint owners of some property sharing profits or gross returns
arising from the property
[Leading case:; Govind Nair v. Maga]
f) Persons sharing the profits but not having mutual agency
Mollow March & Co. v. The Court of Wards
 A widow or child of deceased partner who receives a share
of profits
 A servant or an agent who receives a share of profits as part of
his remuneration; and
[Munshi Abdul Latif v. Gopeshwar Chattoraj]

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Distinction between Partnership And Co-Ownership

Basis of distinction
1. Agreement
2. Business 1. Maximum Limit
3. Profit and loss 2. Transfer of Interest
4. Mutual agency 3. Right to claim partition
5. Name of the 4. Lien on property
persons involved

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Partnership and Hindu Undivided Family (HUF)

1. Agreement 1. Female members
2. Regulating Law 2. Implied Authority
3. Name of the persons 3. Liability of members
involved 4. Right to demand
4. Maximum Limit accounts
5. Admission of new 5. Effect of death of a
members member
6. Minor members

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PARTNERSHIP AND COMPANY

Basis of distinction

1. Legal Entity 1. Agency

2. Liability 2. Distribution of profits

3. Tenure 3. Management

4. Number of members 4. Property

5. Transfer of interest 5. Audit

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PARTNERSHIP AND CLUB

Basis of distinction

1. Objects
2. Number of members
3. Tenure
4. Agency

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REGISTRATION

Is the Registration of Firm Compulsory?

a) No suit by a partner against the firm or the other
partner [Section 69(1)]
b) No suit by the firm against third parties
[Section 69(2)]
c) No right to claim set off in excess of Rs. 100
[Section 69(3)]

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Rights not Affected by Non-registration

a) Rights of unregistered firm or partners thereof
Right of a firm or partner of a firm having no place of business in India

i. Right to file a suit or claim of set-off if the value of suit does not
exceed Rs.100 [Section 69(4)(b)]
ii. Right of a partner to sue
c) For the dissolution of the firm
d) For the accounts of a dissolved firm
e) For claiming share of the assets of a dissolved firm [Section
69(3)(a)]
d) Right of a third party to file a suit against the unregistered firm or
partners thereof
e) Power of an Official Assignee or Receiver or Court to realise the
property of an insolvent partner [Section 69(3)(b)]
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Types Of Partners

Sub-Partner
Actual or
Ostensible
partner Partners in
Sleeping or Partner by profits only
Dormant Estoppel
partner

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Partners by Estoppel or Holding out [Section 28(1)

He must have represented himself to be a partner by
word spoken or written or by his conduct
The other person acting on the faith of such
representation must have given credit to the firm.It is
immaterial whether the person so representing to be a
partner,is aware or not that the representation has reached
the other person

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Position of Minor as a partner

 Rights
 He has the right to share the profits and property of
the firm in accordance with the agreement.
 He has the right to have access to, and inspect and
copy,any of the accounts of the firm.
 He has the right to file a suit for his share of profits or
the property of the firm when he is not given his due share
of profits.However,he can exercise this right only when he
decides to severe his connections with the firm

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Liabilities

 He is liable only to the extent of his share in his
profits and the property of the firm.He is not
personally liable to the third parties

He cannot be declared insolvent upon
declaration of firm’s insolvency .
 His share vests in the official receiver or Official
Assignee.

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Absolute duties Of Partner

• To attend diligently

To equally contribute to the losses.
To indemnify the firm

To hold and use firm’s property for business purposes
To account for and pay the personal profits from
transactions of firm etc.
To account for and pay the personnel profits from a competing
business
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Rights Of Partner

Right to take part
Right to express opinion
Right to have access to book
Right to share profits equally
Right to claim interest on advances
Right to be indemnified
Right to prevent the introduction of a new partner
Right to retire
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• Right not to be expelled
• Right to carry on competing business
• Right to share Subsequent profits
• Right to dissolve the partnership

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Liabilities of partner to third parties

Liability of a partner Liability of the firms Liability of the
for acts of the firm for wrongful acts of firm for
partners misappropriation
by partners

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Authority

Implied Express
 Act should be done
for carrying the business
 In the firm name
 In the usual way

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Implied authority is available for the following acts

A. Buying and selling of gods,on behalf of the
firm, in which the firm deals;
B. Receiving payments of the debts due to the
firm and giving valid receipts for them
C. Contracting debts and paying debts on behalf
of the firm
D. Setting accounts with person dealing with the
firm.

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• Employing the servants for the partnership
firm.
• Drawing cheques,accepting or endorsing bills of
exchange and promissory notes in the name of
the firm
• Pledging movable property of the firm
• Suing on behalf of the firm and defending suits
in the name of the firm

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Implied authority is not available for the following

A. Submit a dispute relating to the business of the firm to
arbitrations
B. Open a banking account on behalf of the firm in his own
name
C. Compromise or relinquish any claim or portion of a claim by
the firm.
D. Withdraw a suit or proceedings filed on behalf of the firm
E. Acquire immovable property belonging to the firm
F. Transfer immovable property belonging to the firm or
G. Enter into partnershipGago's
on behalf of the firm
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Reconstitution of a firm
(or) Dissolution of partnership

Introduction of a partner

Liability of a incoming partner for firm’s acts done
before his admission
Retirement of a partner

Expulsion of a partner
Insolvency of a partner

Death of a partner

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Dissolution of firm

By Agreement By Notice By Court By Contingency By Compulsion
Insanity
Permanent incapacity
Misconduct
Persistent breach of agreement
Transfer of interest
Continuous losses
Just and equitable
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Public Notice [Section 72]

When a public notice is required to be given
On the retirement or expulsion of a partner

On the dissolution of the firm

On the election to become or not to become a
partner by a minor on his attaining majority

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When a public notice is not to be given

A public notice is not to be given in the following two
cases

On the death of a partner

On the insolvency of a partner

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