THE PARTNERSHIP ACT 1932

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The Partnership Act, 1932

[IX OF 1932]

 

(IN ITS APPLICATION TO THE STATE OF MAHARASHTRA)
(Received the assent of the Governor-General on 8th April, 1932)
AMENDED BY MAH. 29 OF 1984 (1-1-1985) 1
AN ACT TO DEFINE AND AMEND THE LAW RELATING TO PARTNERSHIP.
WHEREAS it is expedient to define and amend the law relating to partnership; It is
hereby enacted as follows :

 

SHORT TITLE EXTENT AND COMMENCEMENT.

(1) This Act may be called the Indian Partnership Act, 1932.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on the 1st day of October, 1932, except section 69 which
shall come into force on the 1st day of October, 1933.

DEFINITIONS

 

In the Act, unless there is anything repugnant in the subject or context,
(a) an “act of a firm” means any act or omission by all the partners, or by any
partner or agent of the firm which gives rise to a right enforceable by or against the
firm;
(b) “business” includes every trade, occupation and profession;
(c) “prescribed” means prescribed by rules made under this Act;
(c-1) “Registrar” means the Registrar of Firms appointed under sub-section (1) of
section 57 and includes the Deputy Registrar of Firms and Assistant Registrar of
Firms appointed under sub-section (2) of that section;
(d) “third party” used in relation to a firm or to a partner therein means any person
who is not a partner in the firm; and
(e) expressions used but not defined in this Act and defined in the Indian Contract
Act, 1872, shall have the meanings assigned to them in that Act.

APPLICATION OF PROVISIONS OF ACT IX OF 1872

The unrepealed provisions of the Indian Contract Act, 1872, save in so far as they
are inconsistent with the express provisions of this Act, shall continue to apply to
firms.

DEFINITION OF "PARTNERSHIP", "PARTNER", "FIRM" AND "FIRM-NAME".

 

“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”.

PARTNERSHIP NOT CREATED BY STATUS.

The relation of partnership arises from contract and not from status; and, in
particular, the members of a Hindu undivided family carrying on a family business as
such, or a Burmese Buddhist husband and wife carrying on business as such are not
partners in such business.

“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”.

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.  

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”.

PARTICULAR PARTNERSHIP

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

GENERAL DUTIES OF PARTNERS

Partners are bound to carry on the business of the firm to greatest common
advantage, to be just and faithful to each other, and to render true accounts and full
information of all things affecting the firm to any partner, his heir or legal
representative.

DUTY TO INDEMNIFY FOR LOSS CAUSED BY FRAUD.

Every partner shall indemnify the firm for any loss caused to it by his fraud in the
conduct of the business of the firm.

DETERMINATION OF RIGHTS AND DUTIES OF PARTNERS BY CONTRACT BETWEEN THE PARTNERS.

(1) Subject to the provisions of this Act, the mutual rights and duties of the partners
of a firm may be determined by contract between the partners, and such contract
may be express or may be implied by a course of dealing.
Such contract may be varied by consent of all the partners, and such consent may
be express or may be implied by a course of dealing.

(2) AGREEMENTS IN RESTRAINT OF TRADE.
Notwithstanding anything contained in section 27 of the Indian Contract Act, 1872,
such contracts may provide that a partner shall not carry on any business other than
that of the firm while he is a partner.

THE CONDUCT OF THE BUSINESS

Subject to contract between the partners –
(a) every partner has a right to take part in the conduct of the business;
(b) every partner is bound to attend diligently to his duties in the conduct of the
business;
(c) any difference arising as to ordinary matters connected with the business may be
decided by a majority of the partners, and every partner shall have the right to
express his opinion before the matter is decided, but no change may be made in the
nature of the business without the consent of all the partners;
(d) every partner has a right to have access to and to inspect and copy any of the
books of the firm;
(e) in the event of the death of a partner, his heirs or legal representatives or their
duly authorised agents shall have a right of access to and to inspect and copy any of
the books of the firm.

MUTUAL RIGHT AND LIABILITIES

Subject to contract between the partners –
(a) a partner is not entitled to receive remuneration for taking part in the conduct of
the business;
(b) the partners are entitled to share equally in the profits earned, and shall
contribute equally to the losses sustained by the firm;
(c) where a partner is entitled to interest on the capital subscribed by him, such
interest shall be payable only out of profits;
(d) a partner making, for the purposes of the business, any payment or advance
beyond the amount of capital he has agreed to subscribe, is entitled to interest
thereon at the rate of six per cent. per annum;
(e) the firm shall indemnify a partner in respect of payments made and liabilities
incurred by him
(i) in the ordinary and proper conduct of the business; and
(ii) in doing such act, in an emergency, for the purpose of protecting the firm from
loss, as would be done by a person of ordinary prudence, in his own case, under
similar circumstances; and
(f) a partner shall indemnify the firm for any loss caused to it by his willful neglect in
the conduct of the business of the firm.

THE PROPERTY OF THE FIRM

Subject to contract between the partners, the property of the firm includes all
property and rights and interest in property originally brought into the stock of the
firm, or acquired, by purchase or otherwise, by or for the firm for the purposes and
in the course of the business of the firm, and includes also the goodwill of the
business.
Unless the contrary intention appears, property and rights and interest in property
acquired with money belonging to the firm are deemed to have been acquired for the
firm.

APPLICATION OF THE PROPERTY OF THE FIRM

Subject to the contract between the partners, the property of the firm shall be held
and used by the partners exclusively for the purposes of the business.

PERSONAL PROFITS EARNED BY PARTNERS

Subject to the contract between the partners, –
(a) if a partner derives any profits for himself from any transaction of the firm, or
from the use of the property or business connection of the firm or the firm-name, he
shall account for that profit and pay it to the firm;
(b) 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.

RIGHTS AND DUTIES OF PARTNERS AFTER A CHANGE IN THE FIRM

Subject to contract between the partners, –
(a) where a change occurs in the constitution of a firm, the mutual rights and duties
of the partners in the reconstituted firm remain the same as they were immediately
before the change, as far as may be;
(b) AFTER THE EXPIRY OF THE TERM OF THE FIRM.
where a firm constituted for a fixed term continues to carry on business after the
expiry of that term, the mutual rights and duties of the partners remain the same as
they were before the expiry, and so far as they may be consistent with the incidents
of partnership-at-will; and
(c) WHERE ADDITIONAL UNDERTAKINGS ARE CARRIED OUT.
where a firm constituted to carry out one or more adventures or undertakings carries
out other adventures or undertakings, the mutual rights and duties of the partners in
respect of the other adventures or undertakings are the same as those in respect of
the original adventures or undertakings.

PARTNER TO BE AGENT OF THE FIRM

Subject to the provisions of this Act, a partner is the agent of the firm for the
purposes of the business of the firm.

IMPLIED AUTHORITY OF PARTNER AS AGENT OF THE FIRM

(1) Subject to the provisions of section 22, the act of a partner which is done to
carry on, in the usual way, business of the kind carried on by the firm, binds the
firm.
The authority of a partner to bind the firm conferred by this section is called his
“implied authority”.
(2) In the absence of any usage or custom of trade to the contrary, the implied
authority of a partner does not empower him to –
(a) submit a dispute relating to the business of the firm to arbitration,
(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 proceeding filed on behalf 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.

EXTENSION AND RESTRICTION OF PARTNER'S IMPLIED AUTHORITY

The partners in a firm may, by contract between the partners, extend or restrict the
implied authority of any partner.
Notwithstanding any such restriction, any act done by a partner on behalf of the firm
which falls within his implied authority binds the firm, unless the person with whom
he is dealing knows of the restriction or does not know or believe that partner to be
a partner.

PARTNER'S AUTHORITY IN AN EMERGENCY.

A partner has authority, in an emergency, to do all such acts for the purpose of
protecting the firm from loss as would be done by a person of ordinary prudence, in
his own case, acting under similar circumstances, and such acts bind the firm.

MODE OF DOING ACT TO BIND FIRM

In order to bind a firm, an act or instrument done or executed by a partner or other
person on behalf of the firm shall be done or executed in the firm-name, or in any
other manner expressing or implying an intention to bind the firm.

EFFECT OF ADMISSION BY A PARTNER

An admission or representation made by a partner concerning the affairs of the firm
is evidence against the firm, it is made in the ordinary course of business.

EFFECT OF NOTICE TO ACTING PARTNER

Notice to a partner who habitually acts in the business of the firm of any matter
relating to the affairs of the firm operates as notice to the firm, except in the case of
a
fraud on the firm committed by or with the consent of that partner.

LIABILITY OF A PARTNER FOR ACTS OF THE FIRM

Every partner is liable jointly with all the other partners and also severally, for all
acts of the firm done while he is a partner

LIABILITY OF THE FIRM FOR WRONGFUL ACTS OF A PARTNER

Where, by the wrongful act or omission of a partner acting in the ordinary course of
the business of a firm or with the authority of his partners, loss or injury is caused to
any third party, or any penalty is incurred, the firm is liable therefor to the same
extent as the partner.

LIABILITY OF FIRM FOR MISAPPLICATION BY PARTNERS

Where –
(a) a partner acting within his apparent authority receives money or property from a
third party and misapplies it, or
(b) a firm in the course of its business receives money or property from a third
party, and the money or property is misapplied by any of the partners while it is in
the custody of the firm, the firm is liable to make good the loss.

HOLDINGOUT

(1) Anyone who by words spoken or written or by conduct represent 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 partner’s death the business continued in the old firm-name, the
continued use of that name or of the deceased partner’s name as a part thereof shall
not of itself make his legal representative or his estate liable for any act of the firm
done after his death.

RIGHTS OF TRANSFEREE OF A PARTNER'S INTEREST

(1) A transfer by a partner of his interest in the firm, either absolute or by mortgage,
or, by the creation by him of a charge on such interest, does not entitle the
transferee, during the continuance of the firm, to interfere in the conduct of the
business or to require accounts or to inspect the books of the firm, but entitles the
transferee only to receive the share of profits of the transferring partner, and the
transferee shall accept the account of profits agreed to by the partners.
(2) If the firm is dissolved or if the transferring partner ceases to be a partner, the
transferee is entitled as against the remaining partners, to receive the share of the
assets of the firm to which the transferring partner is entitled and, for the purpose of
ascertaining that share, to an account as from the date of the dissolution.

MINORS ADMITTED TO THE BENEFITS OF PARTNERSHIP

(1) A person who is a minor according to the law to which he is subject 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 a right to such share of the property and of the profits of the firm
as may be agreed upon, and he may have access to and inspect and copy any of the
accounts of the firm.
(3) Such minor’s share is liable for 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 his share of
the property or profits of the firm, save when severing his connection with the firm,
and in such case the amount of his share shall be determined by a valuation made as
far as possible in accordance with the rules contained in section 48 :
Provided that all the partners acting together or any partner entitled to dissolve the
firm upon notice to other partners may elect in such suit to dissolve the firm, and
thereupon the Court shall proceed with the suit as one for dissolution and for settling
accounts between the partners and the amount of the share of the minor shall be
determined along with the shares of the partners.
(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, 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 been admitted as a minor to the benefits of partnership in
a firm, the burden of proving the fact that such person had no knowledge of such
admission until a particular date after the expiry of six months of his attaining
majority shall lie on the person 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 also becomes personally liable to third parties for all acts of the firm
done since he was admitted to the benefits of 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 be to become a partner, –
(a) his rights and liabilities shall continue to be those of a minor under the section
upto the date on which he gives public notice;
(b) his share shall not be liable for any acts for the firm done after the date of the
notice; and
(c) he shall be entitled to sue the partners for his share of the property and profits in
accordance with sub-section (4).
(9) Nothing in sub-sections (7) and (8) shall affect the provisions of section 28.

CHAPTER V INCOMING AND OUTGOING PARTNERS

INTRODUCTION OF A PARTNER

(1) Subject to contract between the partners and to the provisions of section 30, no
person shall be introduced as a partner into a firm without the consent of all the
existing partners.
(2) Subject to the provisions of section 80, a person who is introduced as a partner
into a firm does not thereby become liable for any act of the firm done before he
became a partner.

RETIREMENT OF A PARTNER

(1) A partner may retire –
(a) with the consent of all the otter partners,
(b) in accordance with an express agreement by the partners, or
(c) where the partnership is at will, by giving notice in writing to all the other
partners of his intention to retire.
(2) A retiring partner may be discharged from any liability to any third party for acts
of the firm done before his retirement by an agreement made by him with such third
party and the partners of the reconstituted firm, and such agreement may be implied
by a course of dealing between such third party and the reconstituted firm after he
had knowledge of the retirement.
(3) Notwithstanding the retirement of a partner from a firm, he and the partners
continue to be liable as partners to third parties for any act done by any of them
which would have been an act of the firm if done before the retirement, until public
notice is given of the retirement
Provided that a retired partner is not liable to any third party who deals with the firm
without knowing that he was a party.
(4) Notices under sub-section (3) may be given by the retired partner or by any
partner of the reconstituted firm.

In the Act, unless there is anything repugnant in the subject or context,
(a) an “act of a firm” means any act or omission by all the partners, or by any
partner or agent of the firm which gives rise to a right enforceable by or against the
firm;
(b) “business” includes every trade, occupation and profession;
(c) “prescribed” means prescribed by rules made under this Act;
(c-1) “Registrar” means the Registrar of Firms appointed under sub-section (1) of
section 57 and includes the Deputy Registrar of Firms and Assistant Registrar of
Firms appointed under sub-section (2) of that section;
(d) “third party” used in relation to a firm or to a partner therein means any person
who is not a partner in the firm; and
(e) expressions used but not defined in this Act and defined in the Indian Contract
Act, 1872, shall have the meanings assigned to them in that Act.

EXPULSION OF A PARTNER

(1) A partner may not be expelled from a firm by any majority of the partners, save
in the exercise in good faith or powers conferred by contract between the partners.
(2) The provisions of sub-sections (2), (3) and (4) of section 32 shall apply to an
expelled partner as if he were a retired partner.

INSOLVENCY OF A PARTNER

(1) Where a partner in a firm is adjudicated an insolvent, he ceases to be a partner
on the date on which the order of adjudication is made, whether or not the firm is
thereby dissolved.
(2) Where under a contract between the partners the firm is not dissolved by the
adjudication of a partner as an insolvent, the estate of a partner so adjudicated is
not
liable for any act of the firm and the firm is not liable for any act of the insolvent,
done after the date on which the order of adjudication is made.

“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”.

LIABILITY OF ESTATE OF DECEASED PARTNER

Where under a contract between the partners the firm is not dissolved by the death
of a partner, the estate of a deceased partner is not liable for any act of the firm
done after his death. 

RIGHTS OF OUTGOING PARTNER TO CARRY ON COMPETING BUSINESS

(1) An outgoing partner may carry on a business competing with that of the firm and
he may advertise such business, but subject, to contract to the contrary, he may not
(a) use the firm-name,
(b) represent himself as carrying on the business of the firm, or
(c) solicit the custom of persons who were dealing with the firm before he ceased to
be a partner.
(2) AGREEMENT IN RESTRAINT OF TRADE.
A partner may make an agreement with his partners that on ceasing to be a partner
he will not carry on any business similar to that of the firm within a specified period
or within specified local limits; and, notwithstanding anything contained in section 27
of the Indian Contract Act, 1872, such agreement shall be valid if the restrictions
imposed are reasonable.

RIGHT OF OUTGOING PARTNER IN CERTAIN CASES TO SHARE SUBSEQUENT PROFITS

Where any member of a firm has died or otherwise ceased to be a partner, and the
surviving or continuing partners carry on the business of the firm with the property
of the firm without any final settlement of accounts as between them and the
outgoing partner or his estate, then, in the absence of a contract to the contrary, the
outgoing partner or his estate is entitled at the option of himself or his
representatives to such share of the profits made since he ceased to be a partner as
may be attributable to the use of his share of the property of the firm or to interest
at the rate of six per cent. per annum on the amount of his share in the property of
the firm :
Provided that where by contract between the partners an option is given to surviving
or continuing partners to purchase the interest of a deceased or outgoing partner,
and that option is duly exercised, the estate of the deceased partner, or the outgoing
partner of his estate, as the case may be, is not entitled to any further or other
share of profits, but if any partner assuming to act in exercise of the option does not
in all material respects comply with the terms thereof, he is liable to account under
the foregoing provisions of this section.

REVOCATION OF CONTINUING GUARANTEE BY CHANGE IN FIRM

A continuing guarantee given to a firm, or to a third party in respect of the
transactions of a firm, is in the absence of agreement to the contrary, revoked as to
future
transactions from the date of any change in the constitution of the firm.

DISSOLUTION OF A FIRM

The dissolution of a partnership between all the partners of a firm is called the
“dissolution of the firm”.

DISSOLUTION BY AGREEMENT

A firm may be dissolved with the consent of all the partners or in accordance with a
contract between the partners.

COMPULSORY DISSOLUTION

A firm is dissolved
(a) by the adjudication of all the partners or of all the partners but one as insolvent,
or
(b) by the happening of any event which makes it unlawful for the business of the
firm to be carried on or for the partners to carry it on in partnership :
Provided that, where more than one separate adventure or undertaking is carried on
by the firm, the illegality of one or more shall not of itself cause the dissolution of the
firm in respect of its lawful adventures and undertakings

DISSOLUTION ON THE HAPPENING OF CERTAIN CONTINGENCIES.

Subject to contract between the partners a firm is dissolved
(a) if constituted for a fixed term, by the expiry of that term;
(b) if constituted to carry out one or more adventures or undertakings, by the
completion thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent.

DISSOLUTION BY NOTICE OF PARTNERSHIP AT WILL

(1) 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.
(2) The firm is dissolved as from the date mentioned in the notice as the date of
dissolution or, if no date is so mentioned, as from the date of the communication of
the notice.

DISSOLUTION BY THE COURT

At the suit of a partner, the Court may dissolve a firm on any of the following
grounds, namely :-
(a) that a partner has become of unsound mind, in which case the suit may be
brought as well by the next friend of the partner who has become of unsound mind
as by any other partner;
(b) that a partner, other than the partner suing, has become in any way permanently
incapable of performing his duties as partner;
(c) that a partner, other than the partner suing, is guilty of conduct which is likely to
affect prejudicially the carrying on of the business regard being had to the nature
of the business;
(d) that a partner, other than the partner suing, wilfully or persistently commits
breach of agreements relating to the management of the affairs of the firm of the
conduct of its business; or otherwise so conducts himself in matters relating to the
business that it is not reasonably practicable for the other partners to carry on the
business in partnership with him;
(e) that a partner, other than the partner suing, has in any way transferred the
whole of his interest in the firm to a third party, or has allowed his share to be
charged under the provisions of rule 49 of Order XXI of the First Schedule to the
Code of Civil Procedure, 1908, or has allowed it to be sold in the recovery of arrears
of land revenue or of any dues recoverable as arrears of land revenue due by the
partner;
(f) that the business of the firm cannot be carried on save at a loss; or
(g) on any other ground which renders it just and equitable that the firm should be
dissolved.

LIABILITY FOR ACTS OF PARTNERS DONE AFTER DISSOLUTION

(1) Notwithstanding the dissolution of a firm, the partners continue to be liable as
such to third parties for any act done by any of them which would have been an act
of the firm, if done before the dissolution, until public notice is given of the
dissolution :
Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or
of a partner who, not having been known to the person dealing with the firm to be a
partner, retires from the firm, is not liable under this section for acts done after the
date on which he ceases to be a partner.
(2) Notices under sub-section (1) may be given by any partner.

RIGHT OF PARTNERS TO HAVE BUSINESS WOUND UP AFTER DISSOLUTION

On the dissolution of a firm every partner or his representative is entitled, as against
all the other partners or their representatives, to have the property of the firm
applied in payment of the debts and liabilities of the firm, and to have the surplus
distributed among the partners or which representatives according to their rights.

CONTINUING AUTHORITY OF PARTNERS FOR PURPOSES OF WINDING UP

After the dissolution of a firm the authority of each partner to bind the firm, and the
other mutual rights and obligations of the partners, continue notwithstanding the
dissolution, so far as may be necessary to wind up the affairs of the firm and to
complete transactions begun but unfinished at the time of the dissolution, but not
otherwise :
Provided that the firm is in no case bound by the acts of a partner who had been
adjudicated insolvent, but this proviso does not affect the liability of any person who
has after the adjudication represented himself or knowingly permitted himself to be
represented as a partner of the insolvent.

MODE OF SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS

In settling the accounts of a firm after dissolution, the following rules shall, subject
to agreement by the partners, be observed :
(a) Losses, including deficiencies of capital, shall be paid first out of profits, next out
of capital, and, lastly, if necessary, by the partners individually in the proportions
in which they were entitled to share profits;
(b) the assets of the firm, including any sums contributed by the partners to make
up deficiencies of capital, shall be applied in the following manner and order :
(i) in paying the debts of the firm to third parties;
(ii) in paying to each partner rateably what is due to him from the firm for advances
as distinguished from capital;
(iii) in paying to each partner rateably what is due to him on account of capital; and
(iv) the residue, if any, shall be divided among the partners in the proportions in
which they were entitled to share profits.

PAYMENT OF FIRM'S DEBTS AND OF SEPARATE DEBTS

Where there are joint debts due from the firm, and also separate debts due from any
partner, the property of the firm shall be applied in the first instance in payment of
the debts of the firm, and, if there is any surplus, then the share of each partner
shall be applied in payment of his separate debts or paid to him. The separate
property of any partner shall he applied first in the payment of his separate debts,
and the surplus (if any) in payment of the debts of the firm.

PERSONAL PROFITS EARNED AFTER DISSOLUTION

Subject to contract between the partners, the provisions of clause (a) of section 16
shall apply to transactions by any surviving partner or by the representatives of
deceased partner, undertaken after the firm is dissolved on account of the death of a
partner and before its affairs have been completely wound up :
Provided that where any partner or his representative has bought the good will of the
firm, nothing in the section shall affect his right to use the firm-name.

RETURN OF PREMIUM ON PREMATURE DISSOLUTION

Where a partner has paid a premium on entering into partnership for a 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, regard being had to the terms upon which he became
a partner, and to the length of time during which he was a partner, unless –
(a) the dissolution is mainly due to his own misconduct, or
(b) the dissolution is in pursuance of an agreement containing no provision for the
return of the premium or any part of it.

RIGHTS WHERE PARTNERSHIP CONTRACT IS RESCINDED FOR FRAUD OR MISREPRESENTATION

Where a contract creating partnership is rescinded on the ground of fraud or
misrepresentation of any of the parties thereto, the party entitled to rescind is,
without prejudice to any other right, entitle –
(a) to a lien on, or right of retention of, the surplus of the assets of the firm
remaining after the debts of the firm have been paid, for any sum paid by him for
the purchase of a share in the firm and for any capital contributed by him;
(b) to rank as a creditor of the firm in respect of any payment made by him towards
the debts of the firm; and
(c) to he indemnified by the partner or partners guilty of fraud or misrepresentation
against all the debts of the firm.

RIGHT TO RESTRAIN FROM USE OF FIRM-NAME OR FIRM-PROPERTY

After a firm is dissolved, every partner or his representative may, in the absence of a
contract between the partners to the contrary, restrain any other partner or his
representative from carrying on a similar business in the firm-name or from using
any of the property of the firm for his own benefit, until the affairs of the firm have
been completely wound up :
Provided that where any partner or his representative has brought the goodwill of
the firm, nothing in this section shall affect his right to use the firm-name.

AGREEMENTS IN RESTRAINT OF TRADE

Partners may, upon or in anticipation of the dissolution of the firm, make an
agreement that some or all of them will not carry on a business similar to that of the
firm within a specified period or within specified local limits and notwithstanding
anything contained in section 27, of the Indian Contract Act, 1872, such agreement
shall be valid if the restrictions imposed are reasonable.

SALE OF GOODWILL AFTER DISSOLUTION

(1) In settling the accounts of a firm after dissolution, the goodwill shall, subject to
contract between the partners, be included in the assets, and it may be sold
either separately or along with other property of the firm.
(2) RIGHTS OF BUYER AND SELLER OF GOODWILL.
Where the goodwill of a firm is sold after dissolution, a partner may carry on a
business competing with that of the buyer and he may advertise such business, but,
subject to agreement between him and the buyer, he may not
(a) use the firm-name,
(b) represent himself as carrying on the business of the firm, or
(c) solicit the custom of persons who were dealing with the firm before its
dissolution.
(3) AGREEMENTS IN RESTRAINT OF TRADE.
Any partner may upon the sale of the goodwill of a firm, make an agreement with
the buyer that such partner will not carry on any business similar to that of the firm
within a specified period or within specified local limits, and, notwithstanding
anything contained in section 27 of the Indian Contract Act, 1872 such agreement
shall be valid if the restrictions are reasonable.

POWER TO EXEMPT FROM APPLICATION OF THIS CHAPTER

The State Government of any State may, by notification in the Official Gazette, direct
that the provisions of this Chapter shall not apply to that State or to any part thereof
specified in the notification.

APPOINTMENT OF REGISTRAR OF FIRMS AND DEPUTY AND ASSISTANT REGISTRARS OF FIRMS

(1) The State Government may, by notification in the Official Gazette, appoint a
Registrar of Firms who shall exercise, perform and discharge the powers, functions
and duties of the Register under this Act throughout the State of Maharashtra.
(2) The State Government may likewise appoint one or more Deputy Registrars of
Firms and Assistant Registrars of Firms who shall exercise, perform and discharge all
or such of the powers, functions and duties of the Registrar and in such areas as the
State Government may, by notification in the Official Gazette, specify.
(3) The officers appointed under sub-section (1) and sub-section (2) shall be deemed
to be public servants within the meaning of section 21 of the Indian Penal Code.

APPLICATION FOR REGISTRATION

(1) Subject to the provisions of sub-section of sub-section (1A), the registration of a
firm effected by sending by post or delivering to the Registrar of the area in which
any place of business of the firm is situated or proposed to be situated, a statement
in the prescribed form and accompanied by the prescribed fee and a true copy of the
deed of partnership stating :
(a) the firm-name,
(aa) the nature of business of the firm;
(b) the place or principal place of business of the firm,
(c) the names of any other places where the firm carries on business,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and
(f) the duration of the firm.
The statement shall be signed by all the partners, or by their agents specially
authorised in this behalf.
(1A) The statement under sub-section (1) shall be sent or delivered to the Registrar
within a period of one year from the date of constitution of the firm :
Provided that in the case of any firm carrying on business on or before the date of
commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984, such
statement shall be sent or delivered to the Registrar within a period of one year firm
such date.
(2) Each person signing the statement shall also verify it in the manner prescribed.
(3) A firm shall not have any of the names or emblems specified in the Schedule to
the Emblems and Names (Prevention of Improper Use) Act, 1950, or any colourable
imitation thereof, unless permitted so to do under that Act, or any name which is
likely to be associated by the public with the name of any other firm on account of
similarity, or any name which, in the opinion of the Registrar, for reasons to be
recorded in writing, is undesirable :
Provided that nothing in this sub-section shall apply to any firm registered under any
such name before the date of the commencement of the Indian Partnership
(Maharashtra Amendment) Act, 1984.
(4) Any person aggrieved by an order of the Registrar under sub-section (3), may,
within 30 days from the date of communication of such order, appeal to the officer
not below the rank of Deputy Secretary to Government authorised by the State
Government in this behalf, in such manner, and on payment of such fee, as may be
prescribed. On receipt of any such appeal, the authorised officer shall, after giving an
opportunity of being heard to the appellant, decide the appeal, and his decision shall
be final.

REGISTRATION

(1) When the Registrar is satisfied that the provisions of section 58 have been duly
complied with, he shall record an entry of the statement in a register called the
Register of Firms, and shall file the statement. [19 On the date such entry is
recorded and such statement is filed, the firm shall be deemed to be registered.
(2) The firm, which is registered, shall use the brackets and word (Registered)
immediately after its name.

LATE REGISTRATION ON PAYMENT OF PENALTY

If the statement in respect of any firm is not sent or delivered to the Registrar within
the time specified in sub-section (1A) of section 58, then the firm may be
registered on payment, to the Registrar, of a penalty of one hundred rupees per year
of delay or a part thereof.

DELETION AND ADDITION OF CERTAIN ENTRIES RELATING TO CERTAIN FIRMS, BY REASON OF REORGANISATION OF STATES

(1) Notwithstanding anything contained in this Chapter, a Registrar of Firms
appointed for any area by the Government of Bombay may, by order in writing,
amend the Register of Firms maintained by him by deleting therefrom the entries
relating to any firm, whose place of business has, by reason of the reorganisation of
States under the States Reorganisation Act, 1956, ceased to be situated in the State
of Bombay. The Registrar may likewise and without any charge or fee therefor
amend the Register by adding thereto the entries relating to any firm included in the
Register of another State but whose place of business has, by reason of such
reorganisation, become part of the area within his jurisdiction in the State of Bombay
:
Provided that the Registrar shall, before passing any order under this sub-section,
make such inquiry as he deems necessary and give notice to the firm and the
Registrar of the State concerned.
(2) After such amendment, the Registrar shall cease to perform the functions of a
Registrar in respect of any firm the entries relating to which have been deleted as
aforesaid and shall perform all the functions of a Registrar in respect of any firm the
entries relating to which are added as aforesaid.
(3) Any person aggrieved by an order under sub-section (1) may appeal to such
authority, and within such time, as may be specified in this behalf by the
Government of Bombay notification in the Official Gazette; and such authority shall
pass such order on the appeal as it thinks fit.
(4) An order of a Registrar under sub-section (1), or when an appeal has been
preferred against it under sub-section (3), the order of the appellate authority, shall
be final.
(5) The provisions of this section shall cease to be in force from such date as the
Government of Bombay may, by notification in the Official Gazette, appoint.

DELETION OF ENTRIES RELATING TO CERTAIN FIRMS BY REASON OF FORMATION OF GUJARAT STATE

(1) Notwithstanding anything contained in this Chapter, a Registrar of Firms
appointed for any area by the Government of Maharashtra may, by order in writing,
amend the Register of Firms maintained by him by deleting therefrom the entries
relating to any firm, whose place of business has, by reason of the formation of the
State of Gujarat by the Bombay Reorganisation Act, 1960, ceased to be situated in
the State of Maharashtra :
Provided that the Registrar shall, before passing any order under this sub-section,
make such inquiry as he deems necessary and give notice to the firm and the
Registrar of the State of Gujarat.
(2) After such amendment, the Registrar shall cease to perform the functions of a
Registrar in respect of any firm the entries relating to which have been deleted as
aforesaid.
(3) Any person aggrieved by an order under sub-section (1) may appeal to such
authority and within such time, as may be specified in this behalf by the Government
of Maharashtra, by notification in the Official Gazette and such authority shall pass
such order on the appeal as it thinks fit.
(4) An order of a Registrar under sub-section (1), or where an appeal has been
preferred against it under sub-section (3), the order of the appellate authority shall
be final.

RECORDING OF ALTERATIONS IN FIRM-NAME, NATURE OF BUSINESS AND PRINCIPAL PLACE OF BUSINESS

(1) When an alteration is made in the firm name or in the nature of business of a
firm or in the location of the principal place of business of a registered firm, a
statement shall be sent to the Registrar, within a period of 90 days from the date of
making such alteration, accompanied by the prescribed fee, specifying the alteration
and signed and verified in the manner required under section 58.
(2) When the Registrar is satisfied that the provisions of sub-section (1) have been
duly complied with, he shall amend the entry relating to the firm in the Register of
Firms in accordance with the statement, and shall file it alongwith the statement
relating to the firm filed under section 59.

NOTING OF CLOSING AND OPENING OF BRANCHES

When a registered firm discontinues business at any place or begins to carry on
business at any place, such place not being its principal place of business, any
partner or agent of the firm shall send intimation thereof to the Registrar, within a
period of 90 days from the date of such discontinuance or, as the case may be, from
the date on which the firm begins to carry on business at such place. The Registrar
shall then make a note of such intimation in the entry relating to the firm in the
Register of Firms, and shall file the intimation alongwith the statement relating to the
firm filed under section 59.

NOTING OF CHANGES IN NAMES AND ADDRESSES OF PARTNERS

When any partner in a registered firm alters his name or permanent address, an
intimation of the alteration’ shall be sent, within a period of 90 days from the date of
making such alteration, by any partner or agent of the firm to the Registrar, who
shall deal with it in the manner provided in section 61.

RECORDING OF CHANGES IN AND DISSOLUTION OF A FIRM

When a change occurs in the constitution of a registered firm, every incoming,
continuing or outgoing partner, and when a registered firm is dissolved, every person
who was a partner immediately before the dissolution, or the agent of every such
partner or person specially authorised in this behalf shall, within a period of 90 days
from the date of such change or dissolution, given notice to the Registrar of such
change or dissolution, specifying the date thereof; and the Registrar shall a record of
the notice in the entry relating to the firm in the Registrar of Firms and shall file the
notice along with statement relating to the firm filed under section 59.
(1A) Where a change occurs in the constitution of a registered firm, all persons, who
after such change are partners of the firm, shall jointly send an intimation of
such change duly signed by them, to the Registrar, within a period of 90 days from
the date of occurrence of such change and the Registrar shall deal with it in the
manner provided by section 61.
(2) RECORDING OF WITHDRAWAL OF A MINOR.
When a minor who has been admitted to the benefits of partnership in a firm attains
majority and elects to become or not to become a partner, and the firm is then a
registered firm, he, or his agent specially authorised in this behalf, shall within a
period of 90 days from the date of his election, give notice to the Registrar that he
has or has not become a partner, and the Registrar shall deal with the notice in the
manner provided in sub-section (1).

RECTIFICATION OF MISTAKES

(1) The Registrar shall have power at all time to rectify any mistake in order to bring
the entry in the Register of Firms relating to any firm into conformity with into
documents relating to that firm filed under this Chapter.
(2) On application made by the all parties who have signed any document relating to
a firm filed under this Chapter, the Registrar may rectify any mistake in such
document or in the record of note thereof made in the Register of Firms.

AMENDMENT OF REGISTER BY ORDER OF COURT

A Court deciding any matter relating to a registered firm may direct that the
Registrar shall make any amendment in the entry in the Register of Firms relating to
such firm which is consequential upon its decision; and the Registrar shall amend the
entry accordingly.

INSPECTION OF REGISTER AND FILED DOCUMENTS

(1) The Registrar of Firms shall be open to inspection by any person on payment of
such fee as may be prescribed.
(2) All statements, notices and intimations filed under this Chapter shall be open to
inspection, subject to such conditions and on payment of such fee as may be
prescribed.

GRANT OF COPIES

The Registrar shall on application, furnish to any person, on payment of such fee as
may be prescribed, a copy, certified under his hand, of any entry or portion thereof
in the Register of Firms.

RULES OF EVIDENCE

(1) Any statement, intimation or notice recorded or noted in Register of Firms shall,
as against any person by whom or on whose behalf such statement, intimation or
notice was signed, be conclusive proof of any fact therein stated.
(2) A certified copy of an entry relating to a firm in the Register of Firms may be
produced in proof of the fact of the registration of such firm, and of the contents of
any statement, intimation or notice recorded or noted therein.

EFFECT OF NON-REGISTRATION

(1) No suit to enforce a right arising from a contract or conferred by this Act shall be
instituted in any Court by or on a behalf of any persons suing as a partner in a firm
against the firm or any person alleged to be or to have been a partner in the firm
unless the firm is registered and the person suing is or has been shown in the
Register of Firms as a partner in the firm :
Provided that the requirement of registration of firm under this sub-section shall not
apply to the suits or proceedings instituted by the heirs or legal representatives of
the deceased partner of a firm for accounts of the firm or to realise the property of
the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any court
by or on behalf of a firm against any third party unless the firm is registered and the
persons suing are or have been shown in the Register of Firms as partners in the
firm.
(2A) No suit to enforce any right for the dissolution of a firm or for accounts of a
dissolved firm or any right or power to realise the property of a dissolved firm shall
be instituted in any Court by or on behalf of any person suing as a partner in a firm
against the firm or any person alleged to be or have been a partner in the firm,
unless the firm is registered and the person suing is or has been shown in the
Register of Firms as a partner in the firm :
Provided that the requirement of registration of firm under this sub-section shall not
apply to the suits or proceedings instituted by the heirs or legal representatives of
the deceased partner of a firm for accounts of a dissolved firm or to realise the
property of a dissolved firm.
(3) The provisions of sub-sections (1), (2) and (2A) shall apply also to a claim of setoff
or other proceedings to enforce a right arising from a contract but shall not affect
(a) the firms constituted for a duration upto six months or with a capital upto two
thousand rupees; or;
(b) the powers of an official assigned, receiver or Court under the Presidency Towns
Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property
of an insolvent partner.
(4) This section shall not apply
(a) to firms or partners in firm which have no place of business in the territories to
which this Act extends, or whose places of business in the said territories are
situated in areas to which, by notification under section 56 this Chapter does not
apply, or
(b) to any suit or claim of set-off not exceeding one hundred rupees in value which,
in the presidency towns, is not of a kind specified in section 19 of the Presidency
Small Cause Courts Act, 1882, or outside the Presidency towns, is not of a kind
specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or
to any proceeding in execution or other proceeding incidental to or arising from any
such suit or claim.

Comment: “…Thus, the persons suing, namely, the current partners as on the date of
the suit were not shown as partners in the Register of Firms. The result is that the suit
was not maintainable in view of the provisions of sub-sec. (2) of S. 69 of the said
Partnership Act…” M/s. Shreeram Finance Corporation, Appellants v. Yasin Khan AIR
1989 SUPREME COURT 1769

PENALTY FOR CONTRAVENTION OF SECTION 60, 61, 62, OR 63

If any statement, intimation or notice under sections 60, 61, 62 or 63 in respect of
any registered firm is not sent or given to the Registrar, within the period specified in
that section, the Registrar may, after giving notice to the partners of the firm and
after giving them a reasonable opportunity of being heard, refuse to make the
suitable amendments in the records relating to the firm, until the partners of the firm
pay such penalty, not exceeding ten rupees per day, as the Registrar may determine
in respect of the period between the date of expiry of the period specified in sections
60, 61, 62 or as the case may be, 63 and the date of making the amendments in the
entries relating to the firm.

PENALTY FOR FURNISHING FALSE PARTICULARS

Any person who signs any statement, amending statement, notice or intimation
under this Chapter containing any particulars which he knows to be false or does not
believe to be true, or containing particulars which he knows to be incomplete or does
not believe to be complete, shall, on conviction, be punished with imprisonment for a
term which may extend to one year, or with fine, or with both :
Provided that in the absence of special and adequate reasons to the contrary to be
mentioned in the judgement of the Court, the fine shall not be less than one
thousand rupees.

MAXIMUM FEES AND POWER TO AMEND SCHEDULE I

(1) The fees payable under this Act and the rules made thereunder shall not exceed
the maximum fees as specified in Schedule I.
(2) Subject to the provisions of this section, the State Government may, having
regard to the expenditure incurred or to be incurred for carrying out the purposes of
this Act, from time to time, by notification in the Official Gazette, vary any of the
amounts of maximum fees and other particulars specified in Schedule I, and,
thereupon, the said Schedule shall be deemed to be amended accordingly.
(3) Every notification issued under sub-section (2) shall take effect from the date of
its publication in the Official Gazette, unless some other date is specified therein for
this purpose.
(4) Every notification issued by the State Government under sub-section (2) shall be
laid, as soon as may be after it is issued, before each House of the State Legislature,
while it is in session, for a total period of thirty days, which may be comprised in one
session or in two successive sessions, and if, before the expiry of the session in
which it is so laid or the session immediately following, both Houses agree in making
any modification in the notification or both Houses agree that the notification should
not be issued, and notify such decision in the Official Gazette, the notification shall,
from the date of publication of such decision, have effect only in such modified form
or be of no effect, as the case may be; so, however, that any such modification or
annulment shall be without prejudice to the validity of anything previously done or
omitted to be done in pursuance of that notification.

POWER TO MAKE RULES

(1) Subject to the provisions of section 70A, the State Government may, by
notification in the Official Gazette, make rules prescribing the fees which shall
accompany documents sent to the Registrar or which shall be paid in respect of any
intimation, notice or application given to the Registrar or which shall be payable for
the inspection of documents in the custody of the Registrar or for copies from the
Register of Firms or which shall be paid for supply of any prescribed forms.
(2) The State Government may also make rules
(a) prescribing the form of statement submitted under sub-section (1) of section 58
and of the verification thereof;
(aa) prescribing the manner of filing an appeal under sub-section (4) of section 58;
(b) requiring statements, intimations and notices under sections 60, 61, 62 and 63
to be in prescribed form, and prescribed the form thereof;
(c) prescribing the form of the Register of Firms, and the mode in which entries
relating to firms are to be made therein, and the mode in which such entries are to
be
amended or notes made therein;
(d) regulating the procedure of the Registrar when dispute arises;
(e) regulating the filing of documents received by the Registrar;
(f) prescribing conditions for the inspection of original documents;
(g) regulating the grant of copies;
(h) regulating the elimination of registers and documents;
(i) providing for the maintenance and form of an Index to the Register of Firms
(j) generally, to carry out the purposes of this Chapter.
(3) All rules made under this section shall be subject to the condition of previous
publication.
(4) Every rule made under this section shall be laid, as soon as may be after it is
made, before each House of the State Legislature, while it is in session, for a total
period of thirty days, which may be comprised in one session or in two successive
sessions, and if, before the expiry of the session in which it is so laid or the session
immediately following, both Houses agree in making any modification in the rule or
both Houses agree that the rule should not be made, and notify such decision in the
Official Gazette, the rule shall, from the date of publication of such decision, have
effect only in such modified form or be of no effect, as the case may be; so,
however, that any such modification or annulment shall be without prejudice to the
validity of anything previously done or omitted to be done in pursuance of that rule

MODE OF GIVING PUBLIC NOTICE

A public notice under this Act is given
(a) Where it relates to the retirement or expulsion of a partner from a registered
firm, or to the dissolution of a registered firm, or to the election to become or not to
become a partner in a registered firm by a person attaining majority who was
admitted as a minor to the benefits of partnership, by notice to the Registrar of
Firms under section 63, and by publication in the Official Gazette and in at least one
vernacular newspaper circulating in the district where the firm to which it relates,
has its place or principal place of business, and
(b) in any other case, publication in the Official Gazette, and in at least one
vernacular newspaper circulating in the district where the firm to which it relates has
its place or principal place of business.

REPEALS

Repealed by the Repealing Act, 1938, (1 of 1938), s. 2 and Sch.

SAVINGS

Nothing in this Act or any repeal affected thereby shall affect or be deemed to affect

(a) any right, title, interest, obligation or liability already acquired, accrued or
incurred before the commencement of this Act, or
(b) any legal proceeding or remedy in respect of any such right, title, interest,
obligation or liability, or anything done or suffered before the commencement of this
Act, or
(c) anything done or suffered before the commencement of this Act, or
(d) any enactment relating to partnership not expressly repealed by this Act, or
(e) any rule of insolvency relating to partnership, or
(f) any rule of law not inconsistent with this Act.

SCHEDULE-I

MAXIMUM FEES
(See sections 70A and 71)
——————————————————————————-
Document or act in respect of which the fee is payable, Maximum fee
——————————————————————————-
(1) Statement under section 58(1) Fifty rupees.
(2) Memorandum of appeal under section (4) Twenty-five rupees.
(3) Statement under section 60 Fifteen rupees.
(4) Intimation under section 61 Fifteen rupees.
(5) Intimation under section 62 Fifteen rupees.
(6) Notice under section 63(1) Fifteen rupees.
(7) Intimation under section 63(1A) Fifteen rupees.
(8) Notice under section 63(2) Fifteen rupees.
(9) Application under section 64 Fifteen rupees.
(10) Inspection of the Register of Firms under Seven rupees sub-section (1) of
section 66, for inspection and fifty of one volume of the Register of Firms paise.
(11) Inspection of documents relating to a firm Seven rupees under sub-section
I(2)D of section 66, and fifty for the inspection of all documents relating paise. to
one firm
(12) Copies from the Register of Firms under Two rupees. section 67, for each
hundred words or part thereof.
(13) Price of Forms prescribed under the rules One rupee per Form.
—————————————————————————–

SCHEDULE-II

ENACTMENTS REPEALED – BY REPEALING ACT, 1938 (1 OF 1938) SECTION 2 AND
SCHEDULE

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