Principle/Doctrine of Holding Out.

INTRODUCTION:-Every partner is liable for all acts of the firm done while he is a partner.
Therefore generally a person who is not a partner in the firm cannot be made liable for an act of
the firm. In certain cases however a person who is not a partner in the firm may be deemed to be
a partner or held out to be a partner for the purpose of his liability towards a third party.
 The basis of liability of such a person is not that he was himself a partner or was sharing the
profits o4 was taking part in the management of the business but the basis is the application of
the law of estoppels because of which he is held out to be a partner or deemed to be a partner
by “holding out”
 DEFINITION OF HOLDING OUT: Section 28 of the Partnership Act makes the following
provision under this doctrine:-
(1)Anyone who by words spoken or written or by conduct represents himself or knowingly
permits himself to be represented to be a partner in a firm is liable as a partner in that firm to
anyone who has on the faith of any such representation given credit to the firm, whether the
person representing himself or represented to be a partner does or does not know that the
representation has reached the person so giving credit.
(2) Where after a death of the partner the business is continued in the old firm name the
continued use of that name or of the deceased partner’s as a part thereof shall not itself make his
legal representative or his estate liable for any act of the firm done after his death.
 ESSENTIAL INGREDIENTS: 
1. Representation: - The representation may be in any of the three ways:-
 i) By words written or spoken: - In case of Bevanv/s The National Bank Ltd., a person permitted
his name to be used in the title of the firm. Therefore he was held liable under this principle.
ii) By conduct:- In the case of Parter v/s Lincell: a person by his conduct represented as a partner
and was held liable. Martyn v/s Gray-1863: It was held that by knowingly permitting himself or
suffering himself to be represented as a partner.
iii) Alleged Representation relied:- In the case of Munton v/s Rutherford: it was held that
Mrs.Ruherford was not liable as a partner by estoppels or holding out.
2.Credit to Firm on Representation:- In the case of Oriental bank of Commerce v/s S.R.Kishore&
Co.-1992: It was held he was liable for the acts of the firm on the basis of the principle of
“holding out”.  Section 28 of the Act is based upon the principle of estoppels by conduct. Where
a man holds himself out as a partner or allows others to do it, he is then properly stopped from
denying the character he has assumed, and upon the faith of which creditors may be presumed to
have acted. A man doing so may be rightly held liable as a partner by estoppels as held in a
case of Mollwo March & Co. v/s Court of Wards-1872.
The representation on which a case of “Holding Out” is sought to be established may be express
or implied it may consist of verbal or written statements or even may be by conduct. Form of
representation is not material in such case.
EXCEPTIONS TO THE DOCRINE OF HOLDING OUT:-
1. Tort: The principle of holding a person liable for act of a firm on the ground of holding out
cannot be extended to include liability arising out of tort.
2. Liability of Retired Partner: - The rule of holding-out provided in this section is also
applicable to the retired partner who retires from the firm without giving proper public notice of
his retirement. In such case person who even subsequent to the retirement give credit to the firm
on the belief that he was a partner will be entitled to hold him liable as held in a case of Scrarf
v/s Jardine-1882.
3. Insolvency of Partner: - Insolvency of the partner extinguished as the liability of a partner and
he cannot be held liable even upon this doctrine.
4. Dormant Partner: His retirement does not require a public notice for bringing end to his
liability. According to proviso to section 45(1) of the partnership Act a dormant partner is not
liable for the acts done after the date on which he ceases to be a partner.