Law of Partnership PDF

INDIAN
PARTNERSHIP
ACT,1932
Dr.Shikha Dimri
 Prior to 1932- Chapter XI (Sections 239 to
266) of the Indian Contract Act,1872
 Present Partnership Act is based on English

Partnership Act ,1890
 Sir F. POLLOCK defines partnership as “ the
relation which subsist between persons who
have agreed to share the profits of a business
carried on by all ,or any one on behalf of all of
them.”
Section 4 –
"Partnership" is 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.”
 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"
ESSENTIAL ELEMENTS
 Association of two or more person
 There must be an agreement
 Carrying on of business
 Sharing of profits
 Mutual agency
 Cox v. Hickman
Agreement
 Section 5 declares that a partnership is
created by contract, not by status.
• Abdul v Century Wood Industries

 Deed of Partnership-
 Writing is not prescribed by the Partnership
Act not even for getting the firm registered
under the Act with the registrar of firms.
 But writing is known as ‘instrument of

Partnership’, is necessary under the
Income Tax Act 1961 if the partners desire
their firm to be assessed as such firm.
PARTNERSHIP DEED
CONTENTS:
 Date of Agreement
 Name & Address of the Firm
 Name & Address of the Partners
 Nature of Business
 Duration of Partnership
 Capital invested by each partner
 Ratio to divide Profit & Loss
 Appointment of Auditor & remuneration
 Duties , Function & Powers of Partners
 Rules regarding admission, retirement & death
 Dissolution
 Arbitration
BUSINESS
 The object of every partnership must be

carrying on a business and sharing its profits.
 Section 2 defines business as including every
trade, occupation or profession. The definition
is not exhaustive and is capable of including
any kind of commercial activity aimed at
earning profits.
 Smith v Anderson,
 R R Sarna v Reuben
SHARING OF PROFIT
 Every man who received any portion of profit of a
business had to incur therein the liability of a partner.
This was the state of law up to year 1860 when in Cox v
Hickman the House of Lords reconsidered the test of
determining the existence of partnership. The net result
of this historic decision is that no man is a partner
unless he has right to share the profits of business. But
ever man who received profit is not necessarily a
partner. The conclusive test is that of mutual agency.
 The section does not insist on sharing of loss
MUTUAL AGENCY
 According to section4 the partnership ‘business
must be carried on by all or any of them acting for
all.’ thus if the person carrying on business acts
not only for himself but for others also, so that
they stand in the position of principal or agents,
they are partners.
 Cox v Hickman
 Section 6 : MODE OF DETERMINING
EXISTENCE OF PARTNERSHIP.
Regard shall be had to the real relation

between the parties
Section6 MODE OF DETERMINING
EXISTENCE OF PARTNERSHIP.
 In determining whether a group of persons is or is

not a firm, or whether a person is or is not a
partner in a firm, regard shall be had to the real
relation between the parties, as shown by all
relevant facts taken together.
 Explanation I : The sharing of profits or of gross

returns arising from property by persons holding a
joint or common interest in that property does not
of itself make such persons partners.
 Explanation II : The receipt by a person of a share of the
profits of a business, or of a payment contingent upon the
earning of profits or varying with the profits earned by a
business, does not itself make him a partner with the
persons carrying on the business; and, in particular, the
receipt of such share or payment –
 (a) by a lender of money to persons engaged or about to

engage in any business
 (b) by a servant or agent as remuneration,
 (c) by the widow or child of a deceased partner, as annuity,
or
 (d) by a previous owner or part-owner of the business, as
consideration for the sale of the goodwill or share thereof,
 does not of itself make the receiver a partner with the
persons carrying on the business.
1. Joint owners sharing gross returns
Case – Govind Nair v Maga,
2. Lender of money receiving profits.
Case – Mollwo March & Co. v The Court of

Wards,
3. Servant or agent receiving profits.
Case- Munshi Abdul Latif v Gopeshwar

Chattoraj,
4. Widow or child of deceased partner
5. Seller of goodwill
Duration of firm
 Section7 PARTNERSHIP-AT-WILL.
 Where no provision is made by contract
between the partners for the duration of their
partnership, or for the determination of their
partnership, the partnership is "partnership-
at-will".
 Section8 PARTICULAR PARTNERSHIP.

 A person may become a partner with another
person in particular adventures or undertakings.

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INDIAN

 Present Partnership Act is based on English

"Partnership" is the relation between

collectively " a firm" , and

the name under which their business is

 There must be an agreement

• Abdul v Century Wood Industries

 But writing is known as ‘instrument of

 The object of every partnership must be

Regard shall be had to the real relation

 In determining whether a group of persons is or is

 Explanation I : The sharing of profits or of gross

 (a) by a lender of money to persons engaged or about to

Case – Mollwo March & Co. v The Court of

Case- Munshi Abdul Latif v Gopeshwar

 Section8 PARTICULAR PARTNERSHIP.

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