THE INDIAN PARTNERSHIP ACT, 1932

The law of partnership is contained in the Indian Partnership Act, 1932, which came into force on 1st
Oct., 1932.This is based on the English Law on the subject as contained in the Partnership Act, 1890.
The main principles are the same. The most important change is regarding provision for registration of
firms.

Definition and Nature of Partnership : Section 4 of the Partnership Act defines Partnership as “the
relation between persons who have agreed to share the profits of a business carried on by all or any of
them acting for all”. The English Partnership Act defines Partnership as “the relation which subsists
between persons carrying on business in common with a view of profit”. If we elaborate we find this
definition points out the following essential elements of partnership:
1. There must be at least two persons.

2. That it is the result of an agreement.

3. That it is organised to carryon a business.

4. That the persons concerned agree to share the profits of the business.

5. That the business is to be carried on by all or anyone of them acting for all.

1. Association of at least Two Persons: In order to constitute a partnership legally there must be
an association of at least two persons. Regarding the maximum number of Partners in a firm Sec.
II of the Companies Act provides that the number of partners in a firm carrying on banking
business should not exceed 10 and in any other business 20.

2. Agreement: According to Section 5 a partnership is created by contract and not by status. It is

however, not necessary that there should be a very formal or written agreement. The agreement
to create a partnership may as well arise from the conduct of the parties concerned. Where, the
parties agree to enter into partnership at some future date, the relation of partnership does not
arise until that date.
 3. Business: A partnership can be formed only for the purpose of carrying on business. Business
includes severy trade, occupation and profession. The word business generally conveys the idea
of running business involving numerous transactions. The business to be carried on by the firm
must be legal.

4. Sharing of Profits: The word Partnership is derived from the word “to part” which means “to
divide”. Thus division of profits is an essential condition of the existence of a partnership. The
object of partnership should be to make profits and distribute among the partners.

5. Mutual Agency: The business of partnership may be carried on by all or anyone of them acting
for all. Thus, if a person carrying on the business acts not only for himself but for others also, so
that they stand in the position of principles and agents, they are partners. It is not necessary that
all of them should actively participate in the affairs of business. The necessary element is that
the business must be carried on, on behalf of all the partners.

Test of Partnership: In a partnership

(1) There must be an agreement-oral or written;

(2) The agreement must be to share the profits;

(3) those profits must arise from a business; and

(4) that business must be carried on by all or anyone of them acting for all.

FORMATION OF PARTNERSHIP

In a contract of partnership all the elements of a valid contract must be present. There must be free
consent, consideration, lawful object and the parties must have capacity to contract. Thus an alien friend
can enter into partnership, an alien enemy cannot. A minor is not competent to be a partner. A minor
can, however, be admitted to the benefits of partnership, if all the partners agree to do so.A partnership
agreement may be oral or it may be implied or inferred from the conduct of the parties. When it is
reduced to writing it is incorporated in a document known as the Deed of Partnership or Articles of
Partnership. The deed must be stamped according to the provisions of the Stamp Act. Thereafter, the
firm may be registered with the Registrar of Firms, although registration is not compulsory. Because of
the disabilities suffered by an unregistered firm, it is advisable to register every firm.
According to S.58 the registration should be made in the form of a Statement signed by all the partners
and giving:

(1) The name of the firm;

(2) The principal place of business of the firm;

(3) Name of the other place (if any) where the firm carries on business;

(4) The date on which each partner joined the firm;

(5) The names in full and addresses of the partners;

(6) The duration of the firm. Furthermore, every change in the names and addresses of the partners or
place of business should be notified to the Registrar of Firms from time to time.

REGISTRATION OF A FIRM

Effect of Non-registration of a Firm: Unlike English law registration is optional under Indian
Partnership Act, but it becomes indirectly necessary, so that if a firm is not registered, the following
consequences will ensue:
1. A partner of an unregistered firm cannot file a suit against the firm or any partner to enforce a
right arising from a contract or conferred by the Partnership Act [S.69(1)] Where A, B, C and
Dare partners in an unregistered firm. D is wrongfully expelled from the firm by the rest of partners.
D cannot file suit for his wrongful expulsion, the only remedy available to him is to file a suit for the
dissolution of firm.
2. An unregistered firm cannot file a suit against any third party to enforce a right arising from a
contract. [S. 69(2)]. This clause does not prohibit an unregistered firm to enter into contract with
third parties; the bar is only against taking action against third parties. However, the third parties are
free to take action against unregistered partnership.
3. An unregistered firm cannot claim a set off above Rs.100 in a suit [S.69 (3)]. According to Section
69of the Partnership Act the non-registration of a firm does not affect the following :

a) The right of a third party to sue the firm or any partner.

b) The right of a partner to sue for dissolution of the firm or for settlement of accounts if the firm is
already dissolved or for his share of the assets of the dissolved firm.
c) The right of an unregistered firm to sue to enforce a right arising otherwise than out of contract,
e.g., for an injunction against a person wrongfully using the name of the firm; or for wrongful
infringement of a trade mark. Registration is not necessary for a suit in respect of tort committed
by a partner.
d) The power of an Official Assignee or Official Receiver to realise the property of an insolvent
partner.
e) A suit or set-off not exceeding Rs. 100 in amount.
f) The rights of firms or partners of firms having no place of business in India.

4. Registration Time: An unregistered firm can get itself registered at any time before it is actually
dissolved. But in any case it should be registered before filling a suit in the court, otherwise the
court will reject such suit. In order to institute a suit, not only the firm must be a registered one, but
all the partners suing must also be shown as partners in the register of firms.

Example: A partnership firm consisting of A, Band C as partners was formed and it commenced its
business before getting itself registered. The firm filled a suit against X for a claim of Rs.5000 for
goods supplied to him and immediately after filling the suit, the firm was registered. The court will
dismiss the suit because the firm was unregistered at the time of filling the suit. But where a suit is
dismissed because of the non-registration of a firm or it is with-drawn before it is dismissed by the
court, the firm can subsequently get itself registered and file the suit again provided the suit has not
become time barred.

5. Firm and Firm Name: Persons who have entered into partnership with one another are called
individually“ partners” and collectively “a firm”, and the name under which their business is carried
on is called the “firm name” (Sec. 4).A firm is not an artificial and legal person like a company. It is
merely a collective name for the partners. It is just a convenient way of describing the partners. The
rights and obligations of the partnership firms are really the rights and obligations of the partners
constituting it.
 6. Duration of Partnership: The parties may fix the duration of the partnership or say nothing about it.
Where the partners decide to carry on the business for a certain period of time, it is called a
“partnership for a fixed period”. When the period is over, the partnership comes to an end. Where the
partnership is formed for the purpose of carrying on particular venture, it is called a “particular
partnership”. It comes to an end on the completion of the venture. It is also open to partners to say
nothing about the duration or to agree that the business shall be carried on not for a fixed period, but
so long as the partners are inclined to carry it on. Such a partnership is called “Partnership at will”. It
is dissolved by notice by a partner to his co-partners.

7. Partnership Property: The property of the firm includes (i) all property and rights and interests in
property originally brought into the stock of the firm, or subsequently added thereto; (ii) the property
acquired in the course of the business with money belonging to the firm; (iii) the goodwill of the
business, the property of the firm is acquired to be used by the partners for the exclusive use of the
firm.

Partnership Deed.
The agreement creating partnership may be express or implied, and the latter may be concluded from the
conduct or the course of dealings of the parties or from the circumstances of the case. But it is in the interest
of the partners that the agreement must be in writing. The document which contains this agreement is called
Partnership Deed. It contains provisions relating to the nature and principal place of business, the name of
the firm, the names and addresses of the partners, the duration of the firm, profit sharing ratio, interest on
capital and drawings, valuation of goodwill on the death or retirement of a partner, management,
accounts, arbitration, etc. The Indian Stamp Act, 1889, requires that the Deed must be stamped.

Who can become a partner?

Any person who is competent to contract can enter into partnership agreement. The position of
following persons need special consideration :

1. Minor: A minor is not competent to contract; hence he cannot enter into partnership contract.
However he may be admitted to the benefits of partnership, if all the partners agree to do so.

2. Alien: An alien enemy cannot be partner in an Indian firm.

 3. Person of unsound mind: A person of unsound mind, not being competent to contract cannot enter
into a partnership contract.

4. Company: A company, if authorised by its articles of association can enter into partnership because
it is a person competent to contract in the eyes of law.

5. Firm: A firm cannot enter into partnership contract. If a firm, at all enters into partnership in that
case, the members become partners in the other firm in their individual capacity.

Position of a Minor admitted as a partner to the Benefits of Partnership

We have seen earlier that partnership results from a contract. Consequently, a minor cannot enter into a
contract of partnership as an agreement by a minor is void. It follows that a minor cannot become a
partner, nor can a partnership be created with a minor as a partner. But if all the partners agree a minor
may be admitted to the benefits of an already existing partnership firm. It should be remembered that
even after such admission the minor does not become one of the group of persons called the firm.
Section 30 of the Partnership Act lays down the rights and liabilities of a minor admitted to the benefits
of a partnership as follows:

1. The minor has a right to such share of the property and of the profits of the firm as may be agreed
upon by the partners.

2. The minor has access to and inspect and copy any of the accounts of the firm.

3. The minor is not personally liable for the debts and obligations of the firm although his share inthe
profits and of the assets of the firm will be liable for the same.

4. So long as the minor continues to be in the firm, he cannot file a suit against the other partners for
an account or for the payment of his share of the property or profits of the firm. He can file
such a suit only when he wants to severe his connection with the firm.

5. At any time within six months of his attaining majority, or of his obtaining knowledge that he had
been admitted to the benefits of partnership, whichever date is later, the minor has to elect either to
become or not to become a partner in the firm. Such election may be made by a public notice. If he
 gives no notice to this effect he shall become a partner in the firm on the expiry of the said six
months.

Classes of Partners

A person who deals with a firm would like to know who are the partners, and to what extent they are
liable to him for his claim against the firm. The position of different classes of partners may be
examined as follows :

1. Actual Partner: A person who has by agreement become a partner and who takes actual part in
the conduct of partnership business is an actual and working partner. He is the agent of other
partners for the purposes of the business. All his acts in the ordinary course of the business bind
him and the other partners to third parties.

2. Partner by Holding Out: A person may, under certain circumstances, be liable for the debt of
the firm although he is not a partner. If a person by words spoken or written, or by conduct
represents himself or knowingly permits to be represented, to be a partner in a firm, he is liable
as a partner in that firm to anyone who has, on the faith of such representation, given credit to the
firm (Sec. 28), So, where a person conducts himself as to lend another to believe that he is a
partner, although really he is not, and on that belief the other person gives credit to the firm, he is
deemed to be a partner by holding out.

(a) A, B and C carry on a business for profit. C contributes neither labour nor money, and does
not receive any share of the profits, but his name is used as a partner in the firm. He is liable to
every outsider who gives credit relying on his being there as partner.

3. Dormant or Sleeping Partner: A person who is in reality a partner but whose name does not
appear in any way as partner, nor does he take part in the management of the business, and is not,
therefore, known to outsiders as partner in the firm, is called a dormant or sleeping partner. Such
a partner is liable to third parties who gave credit to the firm even without knowing of his being
partner but subsequently discovering the fact. A sleeping partner’s liability rests on his being in
the position of an undisclosed principal. One important distinction exists between a sleeping and
active partner with regard to liability towards third parties. A sleeping partner is responsible for
the debts of the firm taken during the tenure of his partnership like an active partner. But his
liability ceases immediately on retirement and he is not supposed to give a notice on his
retirement like other active partners.
 4. Partners in Profits only: A partner may stipulate with his co-partners that he will be entitled to
a certain share of the profits without being liable for losses. But he will be liable to outsiders for
all debts and obligations of the firm.
5. Sub-partner: Where a member of a firm agrees to share the profit derived by him from the firm
with a stranger, there arises a sub-partnership between him and the stranger. Such stranger is said
to be a sub-partner, although he is in no way a partner in the original firm, has no rights against
it, nor he is liable forits debts.
6. Incoming Partner: A person who is admitted as a partner into an already existing firm with the
consent of all the partners is called an incoming or new partner. The incoming partner does not
become liable for any act of the firm done before he becomes partner, unless he agrees to be so
liable. His liability commences from the date of admission as a partner.
7. Retired or Outgoing Partner: A partner who goes out of a firm in which the remaining partners
continue to carry on the business is called retired or outgoing partner; A retired partner continues
to be liable for all debts and obligations of the firm incurred before his retirement. A, B and C are
partners and D is the creditor of the firm. A retires from the firm. Remains liable to D. Two years
after A’s retirement the firm becomes insolvent. A wil1 be liable for the debts existing at the time
of his retirement. A retired partner will be liable for all debts incurred after his retirement if he
fails to give proper notice of his retirement. In that case he is deemed to be a partner by holding
out. A retiring partner will also be liable to third parties for all transactions of the firm began but
unfinished at the time of his retirement, even though notice of his retirement is given to third
party. A retiring partner may, however, be discharged from the liability by the consent of the
creditors. The remaining partners will be liable in such a case. This rule is the application of the
general rule of the law of contract known as “Novation”.

The Partnership Act lays down the rights and duties of partners as follows :

Rights

1. Subject to any contract to the contrary, every partner has a right to take part in the management of
the business.
2. Every partner has a right to be consulted and heard in all matters affecting the business of the firm.
In all matters of importance and those affecting the policy and nature of the business or any change
in the constitution of the firm, all the partners must agree, mere majority will not be sufficient. But in
ordinary routine matters the majority ule may apply.
3. Every partner, active or dormant, has a right of free access to all records, books and accounts of the
business and also to examine and copy them.
4. Every partner is entitled to equal share in the profits, unless different proportions are stipulated.
5. A partner who has contributed more than his share of the capital for the purposes of the business is
entitled to interest at a rate agreed upon and where no rate is agreed upon, at6 per cent per annum.
But a partner is not entitled to any interest on the capital subscribed by him unless there is an
agreement or a trade custom to that effect exists.

Duties of Partners

The relation of partners is based on mutual confidence and the law required that a partner must act
towards the other partners with the utmost good faith. In particular, the Partnership Act provides for the
following duties :
1. Every partner must carry on the business of the firm to the greatest common advantage.
2. Every partner must be just and faithful to the other partners.
3. A partner is bound to keep and render true, proper and correct account of the partnership. He must
permit the other partners to inspect such accounts and take copies of them. All money of the firm that
may come to his hand must be handed over to the firm.
4. Every partner is an agent of the other partners and as such is bound to communicate full information
relating to the business of the firm to the other partners.
5. Every partner is bound to indemnify the firm for any loss caused by his fraud in conduct of business.
Also, if a partner commits a fraud on his co-partner, he must indemnify him for any loss caused to
him.

SELF CHECK TEST

(a) A partner without the knowledge of his co-partners obtains for his own benefit the renewal of the
lease of the business promises of the firm. Will he be able to enjoy the lease?
(b) B and C were partners, and C was employed to buy sugar for the firm. C with B’s knowledge sold
his own sugar to the firm at the market price and made a considerable profit. Advise C.
(c) Partnership Deed, signed by Band C, gave B power to introduce into the partnership any of his son
on their attaining the age of 21, B’s son D attained 21 and B proposed to make him a partner. C refused
to consent. Could C prevent D from being a partner?
(d) A was a common partner is two firms publishing newspapers. He communicated information and
news of one firm to the other. Can he be prevented from doing so?
(e) A, B and C were partners in a firm By his wilful neglect and misconduct B caused serious loss to
the business of the firm. After several warnings to B, A and C passed a resolution expelling B from the
firm. B objects to his expulsion. Is he legally entitled to do so?
Answer:

(a) No, the lease so renewed was partnership property,

(b) C must account for to the firm for the profit made,
(c) No, C could not prevent D from being introduced as a partner, as the partnership deed signed by
him and B operated as a consent by both partners.
(d) Yes, A can be prevented by Injunction from doing so. He may also be required to compensate the
firm for any loss caused to it by his misconduct.
(e) No, B cannot object to his expulsion by the other partners. He has misconducted and caused serious
loss to the firm and, in spite of several warnings, has not mended his ways.

Dissolution of Partnership

When there is a change in the relations of partners and the firm continues as a new firm, then it is called
dissolution of the partnership or reconstitution of the firm. Reconstitution of the firm may take place in
various ways, namely;
(1) By admission of a partner,
(2) By retirement of a partner
(3) By expulsion of a partner,
(4) By insolvency of a partner,
(5) By death of a partner and
(6) By transfer of a partner’s share.

1. Admission of a partner (31)

A new partner can be introduced in a firm with consent of all the existing partners of the firm. This is
because the relations of partners are based on mutual trust and confidence, as such, only that person can
be admitted as a new partner who enjoys the confidence of all the partners

(a) The new partners or the reconstituted firm should have assumed the liability of the past debs.
(b) The creditors should be informed of the new arrangement. The new partner becomes liable to those
of the creditors who expressly or impliedly accept the new arrangement.

2. Retiring partner

The retirement of a partner from a firm takes place when he leaves the firm. When a partner retires or
withdraws from the firm and the remaining partners continue with the firm, reconstitution of the firm
takes place. A partner may retire from the firm —

(a) Where all the partners give their consent to retirement.

(b) Where it is a partnership agreement that a partner might retire without seeking the dissolution of the
firm.

(c) Where partnership is at will, by giving notice to all other partners of his intention to retire.

3. Expulsion of a partner (sec. 33)

Ordinarily a partner cannot be expelled from the firm by any majority of the partners. But the authority
of expulsion can be given to the majority only by an express provision in the partnership agreement. But
this power of expulsion can be exercised if three conditions are satisfied. These conditions are :
(a) The right of expulsion should be given to the partners by an express contract,
(b) The power of expulsion should be exercised by a majority of partners,
(c) The power should be exercised in good faith.

4. Insolvency of a Partner (sec. 34)

Where a partner in a firm is declared insolvent, he remains no more a partner on the date on which the
order of declaring him insolvent is made, whether the firm is thereby dissolved or not. The other effects
resulting from the insolvency of a partner are :
(a) The firm is dissolved on the date of order of insolvency but the partners may specifically provide
that on such an event the firm shall not be dissolved.
(b) The estate of the insolvent partner shall not be liable for the acts of the firm done after the date of
the order. A public notice of the order of adjudicating insolvent is not required.
(c) The firm is not liable for the acts of the insolvent partner after the date of order.
5. Death of a partner (sec.s.35 and 42 (c).

A firm is dissolved, subject to contract between the partners, by the death of a partner. However, when
under a contract between the partners the firm is not dissolved, the estate of the deceased partner is not
liable for any act of the firm done after his death. Further, no public notice is required of the death of a
partner.

6. Transfer of a partner’s Interest (sec. 29).

A partner may transfer his interest in firm by sale, mortgage or charge. But the transferee is not entitled
to inter free in the conduct of the business of the firm, to require accounts of the firm and to inspect the
books of the firm. When the partner transfers the share, the transferee only becomes entitled to receive
the share of profit of the partner who has transferred his share. But he has to accept the account of profits
provided by the partners. [Sec. 29 (1)]If the firm is dissolved or if the transferring partner ceases to be a
partner, the transferee is entitled to receive the transferring partner’s share in the assets of the firm. For
knowing that share, he is entitled to an account from the date of dissolution. [sec. 29 (2)]

DISSOLUTION OF FIRM

Dissolution of a firm: Dissolution of a firm means the end of a firm by the breakup of the relation of
partnership between all the partners But where the relation between only some partner is broker it is
called dissolution of partnership. For example, where A, B and C were partners in a firm and A died or
retired or was adjudged insolvent, the partnership firm would come to an end. But if the partners had
agreed that death, retirement or insolvency of a partner would not dissolve the firm, then on the
happening of any of these contingencies the “partnership” would certainly come to an end, but the
firm might continue under the same name. It would be a “reconstituted firm”; for where A had gone out
of the firm on account of any reason; the relationship between A, B and C is broken up and a new
relationship between B and C is created. Therefore, “dissolution of partnership” involves a change in the
relation of the partners, but it does not mean the end of the partnership firm. A firm may be dissolved on
any of the following grounds:

1. By Agreement: A firm may be dissolved with the consent of all the partners of the firm, partnership
is created by contract. It can be terminated by contract (S. 40).

2. By Notice: Where the partnership is at will, the firm may be dissolved by any partner giving notice
in writing to all the other partners of his intention to dissolve the firm. The dissolution takes place
 from the date mentioned in the notice, or, if no date is mentioned then from the date of
communication of the notice to the other partners (S. 43).

3. On the happening of certain contingencies: (S.42): Subject to contract between the partners to
continue the business in spite of the contingency, firm is dissolved.

(a) if formed for a fixed term, by the expiry of that term;

(b) If formed to carry out one or more adventures or undertaking, by the completion thereof;
(c) By the death of partner; and
(d) By the insolvency of a partner.

4. Compulsory Dissolution: According to Section 41 the dissolution of a firm is automatic under the
following circumstances :

(a) If all the partners of a firm or if all the partners except one become insolvent, there must
necessarily be dissolution of the firm. When a partner is declared insolvent, then he ceases to be a
partner from the date of such declaration, since, there must be at least two partners in a firm, if all
partners or all the partners except one become insolvent then the firm is dissolved.

(b) By business becoming illegal : A firm is in every case dissolved if the business of the partnership
is prohibited by law, i.e., the object for which the partnership was formed is unlawful, or becomes
illegal as a result of some subsequent events. This is by operation of law. But if the firm is carrying
on more than one business, if one business becomes illegal the firm is not dissolved.

5. Dissolution through the Court (S.44) : At the suit of a partner, the Court may dissolve a firm on anyone
of the following grounds :
a) If a partner becomes of unsound mind. The suit for dissolution may be filed by the next in kin of the
insane partner or by any other partner.
b) If a partner becomes permanently incapable, of performing his duties as a partner, e.g., he becomes
blind, or paralytic, etc., The suit will be filed by a partner other than the partner who has become
incapable.
c) If a partner is guilty of misconduct which is likely to prejudice the business of the firm, the court
may dissolve the firm at the instance of the other partners. The Court will order dissolution if the act
complained of is likely to affect the credit and customers of the partnership business. Gambling by
the partner, misapplication of clients’ money by a solicitor are the examples of misconduct.
Dissolution of partnership and Dissolution of Firm

It is said that dissolution of partnership does not necessarily lead to dissolution of firm, whereas
dissolution of firm does lead to dissolution of partnership. It is because:

a) Dissolution of firm means the complete breakdown of partnership relation. Dissolution of

partnership simply means a change in the relation or constitution of partners. Even after dissolution
of partnership, the partners may agree among themselves to continue the business.
b) Dissolution of a firm means closing down the business of the firm. But in dissolution of partnership,
the business continues as before except the firm is re-constituted,
c) In case of dissolution of partnership, a partner retires, dies or becomes insolvent but in case of
dissolution of firm, there is complete termination of relation between partners.
d) When the firm is dissolved, its assets are realised and distributed among partners. While in case of
dissolution of partnership, only thing to be done is the ascertainment of the share of the outgoing
partner, because the business continues as before.

Consequences of Dissolution

1. On the dissolution of a firm, it comes to an end and its affairs have to be wound up according to the
rules laid down in the Act. The assets of the firm to be collected and applied in payment of the debt
and liabilities. The deficit, if any is to be distributed among the partners according to their rights. The
deficit, if any, is to be paid by the partners according to the terms of the agreement of partnership.
These proceedings are called “winding up”.

2. Until public notice is given of the dissolution, the partners continue to be liable to third parties for all
acts done in connection with the affairs of the firm.

3. Notwithstanding the dissolution, the authority of each partner to bind the firm continues
(i) so far as may be necessary to wind up the affairs of the firm, and
(ii) To complete transactions begun but unfinished at the time of dissolution.

4. If any partner makes any profit from any transaction connected with the firm after its dissolution, he
must share it with the other partners and the legal representatives of the deceased partners.
5. Where a partner has paid premium on entering into partnership for fixed term, and the firm is
dissolved before the expiration of that term otherwise than by the death of a partner he shall be
entitled to repayment of the premium or of such part thereof as may be reasonable, according to the
 terms of admission and the unexpired period of the term. But he will not get anything if the
dissolution is due to his misconduct or it is in pursuance of an agreement containing no provision for
the return for the premium or any part of it.

SELF CHECK TEST

(a) A and B were partners under an agreement which provided that the partnership should be terminated
by mutual agreement only. Can A terminate the partnership by giving notice to B?
(b) A, an Indian, and B, a Chinese subject, are partners in trade. War breaks out between India and
China. What is the position of the partnership?
(c) A and B were partners, and A was convicted of traveling on the railway without ticket and with
intent to defraud. Will the Court order dissolution of the firm?
(d) A and B carried on business as partners. After some time the relations between them became so
strained that neither would speak to the other. Communications having to be conveyed between
them through the accounts clerk. The firm had made and continue to make large profits. Can the court
order its dissolution?
(e) A and B carried on business in partnership. On B’s death the partnership was dissolved but A
carried on the business for a further period of one year. How the profits earned since B’s death should be
divided?
(f) B, C and J carried on a business as J & Co. J retired and Band C carried on business under a new
name with the addition of “Late J & Co”. J found a new firm carrying on the same kind of business in
premises adjoining the old firm’s premises in the name of J & Co.; and sent circulars about his business
to the customers of the old firm. What are J’s rights and those of Band C ?

Answers :

(a) No, A cannot terminate the partnership by giving notice. He must get B’s consent to do so.
(b) The partnership becomes unlawful and is dissolved.
(c) Yes, the court would order dissolution of the firm. The conviction was for dishonest and calculated
to be detrimental to the partnership business,
(d) Yes, the court would order dissolution of the firm on just and equitable ground, deadlock between
the partners had arisen.
(e) B’s estate is entitled to share in such part of the profits as were earned by the use of the partnership
assets, proportionate to his share in the total partnership assets.
(f) J could carry on his new business in competition with the old firm and in the immediate vicinity,
but without soliciting the customers of the old firm. The old firm could restrain him from canvasing their
customers. Further, although his name was J, he could not carry on his new business in the name of J
&Co., as the old firm had retained J & Co., as part of its name.