CHAPTER I - PRELIMINARY, The Partnership Act, 1932
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 :
[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.
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.
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.
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”.
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.