THE INDIAN PARTNERSHIP ACT,

1932

PRESENTED BY: -Man Pratap Singh

Pooja SinghManish Kumar

CONTENTS

Definition of Partnership Types of Partners Rights of a Partners Liability of Partners to Third Parties

DEFINITION OF PARTNERSHIPAs defined by Partnership Act 1932:

The relation between the persons who have agreed to share the profits of the business carried on by all or any one of them

acting for all.

TYPES OF PARTNERS Active partner

Dormant partner

Nominal partner

Partner in profits only

Sub-partner

Partner by estoppel or holding out

Active partner

A person who takes active interest in the conduct and management of the business of the firm is known as active or managing partner.

He carries on business on behalf of the other partners. If he wants to retire, he has to give a public notice of his retirement; otherwise he will continue to be liable for the acts of the firm

Dormant partner

A sleeping partner is a partner who ‘sleeps’, that is, he does not take active part in the management of the business. Such a partner only contributes to the share capital of the firm, is bound by the activities of other partners, and shares the profits and losses of the business. A sleeping partner, unlike an active partner, is not required to give a public notice of his retirement. As such, he will not be liable to third parties for the acts done after his retirement.

Nominal partner

A nominal partner is one who does not have any real interest in the business but lends his name to the firm, without any capital contributions, and doesn’t share the profits of the business. He also does not usually have a voice in the management of the business of the firm, but he is liable to outsiders as an actual partner.

Partner in profits only

When a partner agrees with the others that he would only share the profits of the firm and would not be liable for its losses, he is in own as partner in profits only.

Sub-partner

A sub-partner is one who shares the profits of another partner. When a partner agrees to share his profits in a firm with a third person, that third person is called a sub-partner. A sub-partner is not a partner in the original firm.

Partner by estoppel or holding out

A partner by estoppel is one who represent himself to be a partner in the firm but in reality he is not so. This kind of partner is not real partner of the firm but by words spoken or written or by conduct, represents him or knowingly permits him to be represented to be a partner in a firm.

RIGHTS A PARTNER

Right to take part in the conduct of the business

Right to be consulted Right to access the books Right to share profits Right to interest on capital Right to interest on advances Right to indemnity

RIGHTS A PARTNER

Right to take part in the conduct of the business :- Every partner has a right to take part in the conduct of the business.

Right to be consulted :-

Right to access the books :- Every partner has a right to have access to and to inspect and copy any of the books of the firm.

RIGHTS A PARTNER

Right to share profits :- The partners are entitled to share equally in the profits earned and shall contribute equally to the loss sustained by the firm.

Right to interest on capital :- Where a partner is entitled to interest on the capital subscribed by him such interest be payable only out of profits. In the absence of an agreement no partner is entitled to any interest on capital invested by him in the firm.

RIGHTS A PARTNER

Right to interest on advances :- A partner making for the purpose of the business any payment of advance beyond the amount of capital he has agreed to subscribe is entitled to interest thereon at the rate of 6%.

Right to indemnify :- The firm is required to indemnify a partner in respect of payment made and liabilities incurred by him.

LIABILITY OF PARTNERS TO THIRD PARTIES

Liability of a partner for acts of the firm

Liability of the firm for wrongful acts of a partner

Liability of the firm for misapplication by partners

Liability of a partner for act of firm (sec.25)

Every partner is jointly and severally liable for all acts of the firm done while he is a partner. Because of this liability, the creditor of the firm can sue all the partners jointly or individually.

Liability of the firm for wrongful act of a partner (sec.26)

If any loss or injury is caused to any third party or any penalty is imposed because of wrongful act or omission of a partner, the firm is liable to the same extent as the partner. However, the partner must act in the ordinary course of business of the firm or with authority of his partners.

Liability of the firm for misapplication by partners (sec.27)

Where a partner acting within his apparent authority receives money or property from a third party and misutilises it or a firm receives money or property from a third party in the course of its business and any of the partners misutilises such money or property, then the firm is liable to make good the loss.