Results 1 to 10 of 10

Thread: The partnership act, 1932

  1. #1
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    The partnership act, 1932


    THE PARTNERSHIP ACT, 1932
    CONTENTS OF THE ACT:
    CHAPTER I. Preliminary.
    CHAPTER II. The Nature Of Partnership.
    CHAPTER III. Relations Of Partners To One Another.
    CHAPTER IV. Relations Of Partners To Third Parties.
    CHAPTER V. Incoming And Outgoing Partners.
    CHAPTER VI. Dissolution Of A Firm.
    CHAPTER VII. Registration Of Firms.
    CHAPTER VIII. Supplemental.



  2. Big Boss Circuit advertisement
    Join Date
    Always
    Age
    2010
    Posts
    Many
  3. #2
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    Re: The partnership act, 1932


    CHAPTER-I: Preliminary

    CONTENTS OF THIS CHAPTER:
    1. Short title, extent and commencement.
    2. Definitions.
    3. Application of provisions of Act IX of 1872.


    PARTNERSHIP ACT. 1 932.

    Act No. IX of 1932
    [8th April, l932]

    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:-

    CHAPTER-I
    Preliminary

    1. Short title, extent and commencement:
    (1) This Act may be called the Partnership Act. 1932.

    (2) It extends to the whole of Pakistan.

    (3) It shall come into force on the 1st day of October, 1932, except section 69, which shall come into force on tile 1st day of October, 1933.

    Comments
    The Partnership Act is an Act to define and amend the law relating to partnership and extends to the whole of Pakistan. It came in to force on 1st October, 1932, except section - 69 relating to effect of non registration of firms, which came into effect on 1st October, 1933.

    2. Definitions:
    In this 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;
    (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 Contract Act, 1872 (IX of 1872), shall have the meanings assigned to them in that Act.

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

    Last edited by The Revivalist; 09-25-2011 at 05:12 PM.

  4. #3
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    Re: The partnership act, 1932


    CHAPTER-II
    The Nature of Partnership

    CONTENTS OF THIS CHAPTER:



    CHAPTER - II
    The Nature Of Partnership

    4. 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".

    Comments
    In story on Partnership, the term is defined as a voluntary contract between two or more competent person to place their money, effects, labour and skill, or some or all of them, in lawful commerce or business, with the understanding that there shall be a communion of the profits thereof between them.

    Halsbury defines a partnership as "the relation which subsists between persons carrying on a business in common with a view of profit".

    Partnership is a relation between individuals who have entered into agreement for the purpose of sharing profits of a business. (PLD-1985 Karachi-85 (90)).

    'Partner', 'Firm', 'Firm's name'.- Individuals bound in relation of partnership are individually called 'Partners' and collectively 'a firm', and the name under which, their business is carried on is called the 'firm name'.
    Proof of existence of Partnership'. Where appellant claimed to be a partner of a partnership firm and one of the alleged partners denied any such partnership, it was incumbent upon the appellant to have proved on record that there was an agreement between the alleged partners for carrying on business in partnership. Registration of firm disclosing that certain persons were its partners was not by itself the proof of execution of any such agreement between the said alleged partners to do business in partnership. (Muhammad Sharif Uppal V Akbar Hussain - PLD 1990 Lah 229).

    Liability of Partners. The Defendant Establishment is a partnership Firm and other Defendants being Partners of that firm were, therefore, jointly and severally liable for the amount claimed in suit - (National Bank of Pakistan V M/s M.M. Agencies and 5 others-1991 CLC 1763)

    Essential Elements of Partnership. There are four important elements necessary to constitute partnership.-

    (i) There must be an association of two or more persons to carry on a business.
    (ii) There must be an agreement entered into by all the persons concerned.
    (iii) The agreement must be to share the profits of a business.
    (iv) The business must be carried on by all or any of the persons concerned acting for all.

    All the above elements must be present before a group of persons can be held to be Partners. Each of these elements are discussed below in their necessary details.

    (i) There must be an association of two or more persons to carry on a business. A group of persons with no legal relations inter se, i.e. no mutual rights and liabilities between themselves would not be a partnership.
    (ii) There must be an agreement entered into by all the persons concerned. This requirement emphasizes the fact that partnership can only arise as a result of an agreement, express or implied, between two or more persons there must be an agreement entered into by all the partners. Partnership is thus created by a contract; it does not arise by the operation of law. Joint ownership may arise by the operation of law, but not partnership. Thus on the death of a person, his children may inherit the family properly jointly together with the family business and may share the profits of the business equally; but they are not, for that reasons, partners.
    Only lawful Agreement. The contract which is the foundation of partnership, must itself be founded on good faith, and must be for a lawful object and purpose and between competent persons. In short it is subject to the ordinary incidents and attributes of contracts.

    (iii) The Agreement must be to share the profits of a business.-The object of the agreement or contract is to carry on a business. And the business which the partners carry on must, of course, be legal. Where there is no partnership. the mere fact that several persons own something in common which produces returns and that such person divide those returns according to their respective interests, does not make them partners.

    For instance A and B are co-owners of a house let to a tenant and A and B divide the net rent between themselves. A and B are not partners, because receiving rent of a house let to a tenant is not a business.

    (a) Term "Business". defined.- The term business has been defined (in S. 2) to include every trade, occupation and profession. This definition, which has been adopted from the English Act, is very general and affords very little assistance when dealing with border line cases. Under-hill has also criticized this definition of the term as being rather vague. It is submitted that in arriving at a conclusion as to when persons can be said to cam/on business, each case must be decided on its own merits, and the only practical guide seems to be dictum of James L.J. When he observed (in Smith V. Anderson) That this word is to be understood in any sense in which any man of business would use the word. Broadly speaking, it refers to any activity which, if successful, would result in profit.

    Business may be temporary or permanent (i.e. indefinite). But it must be in existence. An agreement to carry on business at a future time does no result in present partnership (R.R. Sama V Reuben, AIR 1946 Oudh. 68).

    (b) Sharing of profits. The sharing of profits is an essential element of a partnership agreement. The members of religious or charitable societies and clubs are not partners, as the idea of sharing, or even making of profits is not involved in these societies associations.

    An agreement to share profit is essential but it should be noted that an agreement to share the losses is not essential. Where nothing is said as to sharing of losses it is implied in a partnership deed. It may, however be agreed that as between the partners any one or more of them shall not be liable for losses.

    (c) Profits of business.- The term profits refers to net profits that is to say the excess of returns over advances, or in other words, the excess of what is obtained over the cost of obtaining it. The English Partnership Act expressly provides that sharing gross returns will not constitute a partnership. Thus, in one English case, the owner of a theatre allowed a travelling manager and his company to use the building, scenery, appliances, etc., in consideration of receiving half the money obtained from the spectators. The Court observed that this did not make the owner answerable as a partner of the travelling manager. (Lyon V Knowles, 1863, 3 B & S. 556).

    (iv) Carrying of business.- The last element is that business must be carried on by all or by any of the persons concerned acting for all. This shows that the persons or the group who conduct the business do so as agents for all the persons in the group, and are, therefore, liable to account to all. In fact, the relation of principal and agent amongst the partners i.e. mutual agency, is the true test of partnership. A partner is both a principal and an agent. While the relation between partners inter se is that of principals, but in relation to third parties for the business of the firm, they are agents of the firm and also of one another. Thus each partner is regarded as an agent of the other partners, and as such, a partner acting in the course of the business of the firm, can bind his co-partners. But in order to bind his co-partners, it is necessary for the partner acting on behalf of the firm to contract in the firm name or in any other manner expressing or implying an intention to bind his co-partners. A partner contracting in his own name can create only a personal liability and not the collective liability of the firm. The mere fact that money borrowed by partner in his own name on security belonging to him personally, has been used for the purpose of the firm with the knowledge of his partners, does not render them liable.

    Illustrations:

    (1) A and B buy 100 bales of cotton, which they agree to sell on their joint account. A and B are partners in respect of such cotton.

    (2) A and B buy 100 bales of cotton, agreeing to share the cotton between them. A and B are not partners.

    (3) A and B agree to work together as carpenters. A is to receive all the profits and pay a salary to B,-A & B are not partners.

    (4) A and B enter into a "partnership agreement whereby A is to have no share in either the profits or the loss of the business - A and B are not partners.

    (5) A and B are joint owners of a ship. This, by itself does not make them partners.
    PARTNERSHIP AND CO-OWNERSHIP DISTINGUISHED.- Very much akin to partnership is the legal conception of co-ownership. The distinction between the two is important. Now, partners enjoy common rights over and interest in, in firm's property; all co-owners of property are, however, not partners, co-ownership, therefore though an incident of partnership must be distinguished from it. Co-ownership of a property does not, in itself, constitute a partnership between the co-owners, whether they share any profits arising from it or not. Thus, A and B are co- owners of a house let to a tenant A and B divide the rents between themselves. B contends that A is his partner. Will he succeed? The answer is no. B will not succeed. A and B are not partners but co-owners. But if A and B use that house as a hotel, they would become partners in the business of hotel - keeping.

    Similarly, co-owners of a ship are not necessarily partners. If, however, they employ the ship in trade or adventure on their account, they would become partners in such trade.

    SUMMARY OF DIFFERENCE BETWEEN

    CO-OWNERSHIP PARTNERSHIP
    1. Not always a result of agreement. 1. Always a result of agreement.
    2. Does not always involve Community of profits or losses. 2. Involves Community of profits and losses.
    3. Co--owner can transfer his interest without consent of other co-owners. 3. A partner can not do so.
    4. Co-owner is not agent of other co-owners. 4. Partners are agents of one another.
    5. Co-owner has no lien on thing owned by all co-owners. 5. A partner has such lien.
    6. Co-owner is entitled to partition. 6. Partner is entitled to have partnership dissolved and take share of the proceeds.


    7. Remedies which one co-owner has against the other are different from, and less extensive than, of a partner against his co-owners.

    'PARTNERSHIP' AND 'COMPANY' DISTINGUISHED. The main points of difference between a partnership and a company are given in a tabular form as follows-

    PARTNERSHIP COMPANY
    1. A partnership is not a distinct legal person, but is made of the persons composing it. 1. A company is a distinct legal person.
    2. Creation of Partnership is purely a matter of agreement between the parties such an agreement need not even be in writing. 2. Creation of Company involves elaborate legal formalities.
    3. In a firm partner can not transfer his interest with the consent of the other partners. 3. Shares in a Company (especially, in a public Company) are generally freely transferable.
    4. Each partner is prima facie the agent of others, and can bind them by his contract made in the course of business of the partnership. 4. Shareholders in a Company are not the agents of one another.
    5. Each partner is liable in full for the debts of the firm. 5. The liability of Company’s shareholders is limited by shams or by guarantee.
    6. A partner can not contract with his firm. 6. A share holder in a company can contract with the company.
    7. Partners may make any private arrangements among themselves. For instance a partner may buy his partners share. 7. Arrangements in regard to Companies are regulated by law and statute for instance a company cannot buy its member's shares, but a partner can.
    8. The Maximum number of partners can be twenty. But in banking business it is ten. 8. There is no maximum number of share holders laid down by the law in a public company though the minimum is seven. In a private Company, the minimum is two, and the maximum is fifty.
    9. The death or retirement of a partner dissolves a firm. 9. Death or retirement of a share holder does not dissolve the company.
    10. Property may be the common property of partners. 10. Property belongs to the company and not to its members.
    11. Restrictions contained in a partnership deed will not affect third parties, who are not aware of such restrictions. 11. On the other hand restrictions in the Articles of a Company affect third parties also.
    12. A firm cannot sue and be sued in its own name. 12. A company can sue and be sued in its own name.
    13. Decree against a firm can be executed against the partners. 13. A Decree against a company cannot be executed against its shareholders.
    14. Registration is optional. 14. Registration is compulsory.
    15. A firm having no separate legal existence, cannot be shareholder of company. 15. A company on the other hand can be a shareholder of another company.


    PARTNERSHIP AND CLUB DISTINGUISHED.- A club is entirely different from a partnership. Clubs are not association for gain and unlike partners, members of a club are not liable for acts of the other members. It is to be noted that no member of club is liable to a creditor of the club, unless he himself has also assented to such contract. Whereas there is no limit (generally speaking) to a partner’s liability, in clubs no member becomes liable to pay any money beyond the subscription amount required to be paid under the rules and regulations of the club. Unlike partners members of club have no implied authority to bind other members of the club.

    PARTNERSHIP AND TRADE ASSOCIATION DISTINGUISHED.- Mutual Agency, which is the essential element of partnership, does not exist in a trade association.

    In one case, an association of cloth dealers getting quotas of cloth allotted to it, and then distributing the quotas to its member firms, was held not to be a partnership, this was so despite the fact that the profit made by the Association by re-selling the cloth were divided amongst the member. There was no mutual agency, and no partnership in the circumstances. (Bhawamilal Lachchi Ram v Badri Dal AIR 1964 MP 153).

    Working Partner.- A ‘working partner’ is not necessarily a partner in the business. He may be merely an employee under the capitalist partner although working partner gets a share in the net profits as remuneration for the service rendered by him.

    Minor partner.- A person having capacity to contract can be a partner. Therefore, minor can not be full fledged partner in a partnership, though the may be admitted to the benefits of partnership.

    5. 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.

    Comments
    Sec. 5, lays down that the relation of partnership arises from contract, and not from status. It also provides that the members of a Hindu undivided family carrying on a family business as such or a Burmese Bhuddhist husband and wife carrying on business as such, are not partners in such business.

    "Partnership" Commencement.- Partnership deed comprising of business of constructing a Cinema as well as winding it up. Contended that partnership did not commence before carrying on of business of cinema contention repelled and Held, partnership business started when payment of first installment was given for carrying on construction of cinema. (Lt. Col. Mahmood Khan Durrani V Syed Naushab Ali-NLR 1981 UC 342).

    JOINT HINDU FAMILY FIRM AND PARTNERSHIP DISTINGUISHED.- There are six important points of distinction between a partnership firm and a joint Hindu family firm, these are given in tabular form as follows--

    PARTNERSHIP HINDU JOINT FAMILY FIRM
    1. A partnership firm arises as a result of an agreement or a contract. 1. A joint Hindu family firm is not the result of an agreement or contract voluntarily entered into by persons, but one which arises by the operation of law. The moment a child is bom into a trading family, by the very fact of its birth it becomes a member of the trading family.
    2. The death of a partner dissolves the partnership. 2. The death of a member does not dissolve the family firm.
    3. A new partner can be admitted only with the consent of the other partners. 3. There are constant additions by the birth of male members in the family.
    4. Partners have authority to borrow, and bind the other partners by their acts. 4. Only the manager has authority to borrow and bind other member of the family firm.
    5. All partners are personally liable for the debts of the firm. 5. Only the manager is personally liable for the debts of the family firm.
    6. Partner can demand accounts of the firm. 6. A member can not ordinarily ask for an account of the past dealings.


    Muhammadan law:- In view of the position stated above it is quite clear that a Hindu Joint family firm is not a result of an agreement or contract voluntarily entered into by persons, but one which arises by the operation of law, the moment a male child is born into a trading family, by the mere fact of its birth it becomes a member of the trading firm. But, the position in Muhammadan Law is quite different. Under Muhammadan Law, there is no family trading partnership, such as the one which exists under Hindu Law. Under the Muslim Law, unless it is proved that father and sons have entered into a contract of partnership, the sons do not become partners and they can not be sued in regard to transaction for which the father was responsible.

    6. 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 1.
    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 2.
    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 business, does not of 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.

    Comments
    A, B and Co., carded on a business and incurred debts. E, a creditor of A, B and Co., sued A,B, and two other persons C and D as being members of the partnership C contributed labour only and used to receive one-third share in net profits. D. had deposited a certain amount and he also got one-third share in the profits. The remaining one third was taken by both A, and B, Discuss the respective liabilities of C and D to E?

    The Answer to above problem is that from the facts given it is obvious that C is a servant and D is lender of money. The receipt by them of a share in the profits does not of itself make either of them a partner in the A, B and Co., Hence, C and D are not liable to E.
    Test of Partnership. Although the right to participate in the profits of a business is a strong test of partnership, yet whether the relationship does or does not exist must depend on the real
    intention and contract of the parties, the real test as whether such participation in profits constitutes the relationship of principal and agent between the persons taking the profits and those actually carrying on the business. (AIR 1946 Bom. 174 (DB) + AIR 1957 Mad 8 (DB) + AIR 1956 All. 136).
    Existence of Partnership. Proof:- Where appellant claimed to be a partner of a partnership firm and one of the alleged partners denied any such partnership, it was incumbent upon the appellant to have proved on record that there was an agreement between the alleged partners for carrying on business in partnership Registration of firm disclosing their - in that certain persons were its partners was not by itself the proof of execution of any such agreement between the said alleged partners to do business in partnership. (Muhammad Sharif Uppal V Akbar Hussain PLD-1990 Lah 229).

    Reciprocal promises formed Consideration of Partnership agreement: It is established law that for entering into a partnership agreement there is no necessity of consideration in cash, or advance of any amount, and that the reciprocal promises of the parties form the consideration for an agreement of partnership Held - Courts below fell in error of law in determining the controversy between the parties on the basis that since no payment has been proved to have been made by the appellants, consequently, the deed of partnership between them was invalid or ineffective (Noor Muhammad V Sabz Ali- PLD 1976 B.J. 22).
    Partner on fixed Profits. The fact that one partner is paid a fixed amount per month in lieu of profits is not inconsistent with a partnership.- (AIR 1927 Born 187 51 Bom 342 (DB).
    Persons who may share in profit without being liable as Partners.- Explanation 1&2 to Sec. 6 of the Act lay down that the participation by a person in the profits of a business either by receiving a share therein or a payment dependent upon, or varying with the profits is not enough of itself, to warrant the inference that such a person is a partner with those who are engaged in carrying on the business. The receipt by a person of a share of the profits of a business is a prima facie evidence that he is a partner but this is not a conclusive test. Clauses (a) to (d) of explanation-2 of (seen above) state the particular cases of persons who share in profits of a business without being liable as partners.

    6A; Act not to apply to certain, relationships:
    Nothing contained in this Act shall apply to a relationship created by any agreement between a banking company and a person or group of persons providing for sharing of profit and losses arising from or relating to the provision by the banking company of finance to such person or group of persons.

    Explanation.-
    For the purposes of this section, "banking company" and "finance" shall have the same meaning as in the Banking Tribunals Ordinance, 1984.

    7. 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".

    Comments
    According to Sec. 7 the "Partnership at will" is a partnership agreement between the partners where by neither any definite period of partnership nor a provision. for the determination of the partnership has been provided, and its duration is left to the discretion or will of the partners themselves.

    8. Particular Partnership:
    A person may become a partner with another person in particular adventures or undertakings.

    Comments
    Particular partnership duration of.- Partnership Deed clearly stating formation of Partnership, to run agency acquired by plaintiff at a particular station from a particular company. Partnership, held formed for a single venture and could continue only as long as agency lasted. Partners if wishing to carry on partnership on expiry of agency for running some other business, could do so only by a fresh agreement. (Hussain Bhai V Mohd Iqbal PLD 1976 Quetta 9).

    Single transaction.- Under section 8 a partnership can be for one transaction or one adventure only. The words ‘adventure’ or ‘undertaking’ in the section do not cannot matters of very short duration, the transaction though single may stretch over a short period the distinction between ‘single venture’ and a business is that a single venture finishes immediately after the purchase and sale. There is no continuity or "Carrying on" of the business in the senses that one or move partners continue to have the responsibility and so apply their discretion in buying storing, selling and keeping charges of moneys over a length of period.

    Last edited by The Revivalist; 09-25-2011 at 05:19 PM.

  5. #4
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    Re: The partnership act, 1932


    HAPTER-III
    Relations of Partners To one Another

    CONTENTS OF THIS CHAPTER:
    9. General duties of partners.
    10. Duty to indemnify for loss caused by fraud.
    11. Determination of rights and duties of partners by contract between the partners. Agreements in restraint of trade.
    12. The conduct of the business.
    13. Mutual rights and liabilities.
    14. The property of the firm.
    15. Application of the property of the firm.
    16. Personal profits earned by partners.
    17. Rights and duties of partners after a change in the firm, alter the expiry of the term of the firm, and where additional undertakings are carried out.



    CHAPTER-III
    Relations of Partners to one Another

    9. General duties of partners:
    Partners are bound to carry on the business of the firm to the 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 or his legal representative.

    Comments
    Sec. 9 imposes the following two paramount duties and liabilities on a partner.-

    1. Duty of good faith and common advantage.
    2. Duty to render true accounts and full information.

    1-Duty of good faith and common advantage provides that partners are bound-

    (a) to carry on the business of the firm to the greatest common advantage; and

    (b) to be just and faithful to each other. This duty is very widely and generally worded. In practice, it means that all the endeavours of partner must be directed towards securing maximum profit for the firm, thus, where a partner was authorised to sell property of the firm for 6000 pound and he sold it for a much higher price and concealed the excess price, he was held bound to share it with his co-partner. (Dunne V English, 18 eq 524).

    This is a fundamental duty imposed upon partners by the Act, and can not be excluded by a mutual agreement to the contrary.

    Fiduciary obligation. This duty also introduces the element of a fiduciary obligation on a partner. Commenting on this fiduciary relationship Bacon V.C. observed in (Helmore V. Smith, (1886) 35 ch. D. 436 as follows:-

    "If fiduciary relationship means anything, I cannot conceive a stronger case of fiduciary relations than that which exists between partners. Their mutual confidence is the life blood of the concern. It is because they trust one another that they are partners in the first place; it is because they continue to trust one another that the business goes on."

    Likewise, a partner cannot make secret profit at the expense of the firm. In one english case a partner of a firm of sugar refiners was entrusted to buy sugar for the stock (which he had bought earlier at a lower price) at the prevailing market price, making a considerable profit on the transaction. In a suit filed by other partners, it was held that he was bound to account for such profit and that the firm was entitled to that profit. Bentley V Craven, 1853, 18 Beav 75).

    2-Duty to render true accounts and full information is also imposed upon a partner by Sec. 9 This duty of a partner is based on the principle of Uberriance fidei (utmost good faith), and calls upon partners to make full and frank disclosures of all facts affecting the affairs of the firm.

    Thus, when a partner is in possession of vital information about the affairs or assets of the firm, and concealing such information, if he makes a contract with his Co-partners, the contract can be avoided by the co-partners (Law V Law (1905) 1 ch. 140).

    10. 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.

    11. 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 Contract Act, 1872, IX of 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.

    Comments
    Section-11 of the Act provides for the determination of rights and duties of partners by agreement between them. But no such agreement can override or contravene the provisions of the partnership Act. Section-32 and 44 of the partnership Act being both independent provisions of law, one can not override the other and hence the argument that an agreement entered into between the partners, permitting one of them to retire, would take away the power of the court to dissolve such a partnership under section-44 of the Act, has no force. (PLD-1961 Lah. 468).

    12. 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 partners 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; and
    (d) every partner has a right to have access to and to inspect and copy any of the books of the firm.

    Comments
    1. Right to take part in business. Under sub-clause (a) of this Section every partner has the right to take part in the conduct of the business of the firm. If, therefore a partner is wrongly prevented from taking part in the firm's business he can obtain an injunction from the Court against the erring partner.

    However, it is not un-usual to provide in the partnership deed, for an exclusion of this right as regards some of the partners.

    2. Right to have access to books.- Under sub-clause (d) of the Section every partner has a right to have a access to, and inspect and copy, any of the books of the firm. A partner need not exercise this right personally, but may have the accounts inspected by his agent, as for instance, by his accountant.

    In one English case, a sleeping partner wished to sell his interest to the other partners. He therefore authorised a valuer to inspect the accounts and to ascertain the value of his interest. the other partners objected, and the court held that they could not have any objection, unless, of course there was reasonable ground for objecting, as for instance, the protection of trade secrets. (Bevan V Webb, 1900-3 A.I.E.R. Rep.206)

    13. Mutual rights 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.

    Comments
    Sec. 13(a)- Expressly provides that a partner is not entitled to receive remuneration in the conduct of partnership business. But the partnership agreement may provide for payment of any amount of remuneration to the working partners. However, in the absence of such a provision, partners are not entitled to any salary or remuneration.

    S. 13(b).Subject to contract to the contrary between the partners, they are entitled to share equally in the profits earned by the firm. In such a case, they are likewise also liable equally to the losses. However, a partner ship deed may provide that any one or more of the partners will not be liable to bear the losses of the firm.

    S. 13(c) (d)- If a partner has advanced for the purposes of the business of the firm, a sum of money over and above the capital which he has agreed to subscribe, he is entitled to interest on such amount at the rate of six per cent per annum.
    Entitlement to interest. Not every amount which on proper accounting was found due to the partner as in excess of his share, would get assimilated to or could be treated as advance made by the partner for the purposes of business within the meaning of S.13(d) of Partnership Act so as to entitle the partner to interest there on. (Pakistan shipping corporation V Rustam F. Cowasjee 1989 SCMR 1332)

    S.13(e)- of the Act provides dual indemnity to a partner. The first indemnity is based on the general rule of an agent's right to be indemnified in respect of lawful acts done by him in the exercise of his authority.

    The second indemnity covers out goings which are in the nature of emergency or salvage expenses incurred by a partner personally on behalf of the firm in circumstances of emergency. Thus, in mining business a partner may incur expenses to sink a new shaft immediately to reach un-ex-hausted minerals.

    14. The property of the firm:
    Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or 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 interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm.

    Comments
    Partnership property.- The property of the firm, as stated above in the section itself, also includes its goodwill. The term goodwill is not defined by the Act, and may be said to be "the whole advantage, whatever it may be, of the reputation and connection of the firm". It is something more than the mere chance or probability of old customers maintaining their connection with the firm.

    Exparte Hinds (1849) 3 De 4.2/Sm. 603- One partner in a firm buys railway share in his own name without the authority of the other partners, but with money and on account of the firm. Are these shares partnership property? Yes- Section-14 governs such case.

    Partnership between A and B.- Machinery purchased by A and brought by him in partnership business as his further investment and receiving profit in lieu thereof in form of hire. Dissolution of partnership and B purchasing partnership business to-gether with all machinery. A after dissolution of firm and purchase of assets by B can not claim machinery as his own property- (Abdul Karim V Usman PLD- 1976- Kar 479)

    Partnership property.- Premises held on lease by one partner, allowed to be used for partnership business. No written agreement Oral, agreement confined to sharing profits and allowing partnership to disputed promises. Held no further agreement should be implied or inferred with regard to lease of premises. Mere use of such premises by partnership would not make premises part of partnership property. Such premises after dissolution of partnership should be treated as being properly of partner who brought into partnership. - (Khuda Bux V Badrul Hassan PLD 1968 Kar 657).

    Licence for Mining - Whether property of Partnership. Prospecting licence for mining issued on the application to plaintiff. Plaintiff subsequent to making such application entered into partnership with defendants for prospecting the mine. Prospecting mining Licence whether to be regarded as property of the firm. Property of the firm would include all property, rights and interests in property originally brought into the stock of the firm. Partnership deed clearly showed that plaintiff having to get sanctioned the mining lease had made one of the defendants a partner in it. Intention to bring prospecting licence into stock of the firm or make it property of the firm was thus clear. Such position was not changed in the subsequent partnership deed inducting therein other defendants as partners. Every partner thus became equally interested in the whole of partnership assets.- (Fazal Hussain V Barkat Ali-1980 SCMR 1901).
    15. Application of the property of the firm:
    Subject to contract between the partners, the property of the firm shall be held and used by the partners exclusively for the purposes of the business.
    Comments
    Section-15 stipulates the rule subject to a contract between the partners, the property of the firm shall be held and used by the partners exclusively for the purposes of the business of the firm.

    16. Personal profits earned by partners:
    Subject to contract between the partners,-

    (a) if a partner derives any profit for himself from any transaction of the firm, or from the use of the properly 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.

    Comments
    S. 16(a)- If a partner derives any profit for himself, which profit is the result of the condition given
    in the section, in that case he must account for such profit and pay it to the firm.

    In Gardener V Mecutecheon (1842 Beav. 534) a ship belonged to two partners, one of whom was also the captain of the ship, whilst the ship was operating under charter parties, the captain made considerable profits by making certain contracts. The Court held that he was liable to account for such profits.

    Accounts of Partnership. Accounts of firm had not been settled between parties and appellant instead of settling accounts and distributing assets had started new business. Courts decision for appointing Nazir as Receiver for taking over books of accounts (w/o xxvi, R. 11 of CPC ) of appellant and handing over their photo-copies to respondent was up-held by High Court. (Ahmad Raz V Zarina 1989 ALD 518 (1)).

    S. 16(b) lays down that if a partner carries on any business of the same nature as, and competing with that of firm, he must account for and pay to the firm all profits made by him in that business.

    In one case, a partnership was entered into for the business of importing salt into India and for re-selling the same in Chittagong. One of the partners in the course of the operations, bought some quantity of salt for himself and re-sold the some on his own account. The Calcutta High Court held that the partner was liable to account for this profit to his co-partners, as the opportunity to make such a profit came his way while he was on the business of this firm. (Pulin v Mahendra, (1921) 34 cal. L.J. 405).
    Competing business. Partners during subsistence of partnership, cannot carry on competing business with that of firm, unless there was a contract to contrary and if, in absence of such contract, a partner carried on a business of same nature as and competing with that of firm, he would be liable for and pay to firm all profits made by him in that business. Not necessary to prove that rival business had been set up with income of profits of partnership. (Zarina V Ahmed Raza 1989 ALD 296).
    Attracting Provisions of section. 16(b). Not necessary to establish rival business as having been set up with income or profits of parties partnership firm.- (Abdul Rahim V Abdul Aziz 1970 SCMR 750).

    17. 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, and: 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, so far as they may be consistent with the incidents of partnership at will; and

    (c) where additional under takings 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.

    Comments
    Problems.- (1) X and Y are partners for seven years, x taking no active part in the business. After the expiry of seven years, y continues the business in the same name and with the property of the firm, without giving any account to X. Is x entitled to a share in the profits of the business.

    Ans.-In the above circumstances, the partnership is not dissolved and X is entitled to participate in the profits on the same terms as those of the original agreement. (Parson v Hayward - (1862) 4 D.F.J. 474).

    (2) An agreement of partnership between P, Q and R for one year contains an arbitration clause. The partnership is continued beyond one year. Is the arbitration clause binding on the partners after one year has expired.

    Ans.- An arbitration clause is not inconsistent with a partnership at will (See clause (b)) and therefore arbitration clause continues to bind the partners even after the expiry of one year. (Gillett V Thomton 1875 L.R. 19).

    (3) X and Y were partners in a business with 60% and 40% shares respectively. On the death of X his son, Z, stepped into his shoes, and continued the business with Y without and express agreement. What is the share to which Z is entitled.

    Ans.- Applying clause(a) of Section, Z will be entitled to the same share as his father was entitled namely 60% (Dawood Sahib V Sheikh Mohideen - 1937-2 M.L.J. 760).








    Last edited by The Revivalist; 09-25-2011 at 05:34 PM.

  6. #5
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    Re: The partnership act, 1932


    CHAPTER-IV:Relations of Partners To Third Parties.

    CONTENTS OF THIS CHAPTER:



    CHAPTER - IV
    Relations Of Partners To Third Parties

    18. 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.

    Comments
    Section-18 lays down that a partner is the agent of the firm for the purpose of the business of the firm.
    A Partner Principal as well as an Agent.- This is one of the most important tests of partnership as agency is the essence of the relationship of partnership. Therefore, a partner is both a principal and an agent. While the relation between partners interse is that of principals, they are agents of the firm and of one another in relation to third parties for the purposes of the business of the firm. Thus, each partner is regarded as an agent of the other partners, and as such, a partner, acting in the course of the business of the firm, can bind his co-partners. But, in order to bind his co-partners, it is necessary for the partner acting on behalf of the firm to contract in the firms name or in any other manner expressing or implying an intention to bind his co-partners. A partner contracting in his own name incurs only a personal liability, and not the collective liability of the firm. The mere fact that money borrowed by a partner in his own name on security belonging to him personally has been used for the purpose of the firm with the knowledge of partners, does not render them liable.

    19. Implied authority of partner as agent of the firm:
    (1) Subject to the provisions of section 22, the act of 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 immoveable property on behalf of the firm,
    (g) transfer immoveable property belonging to the firm, or
    (h) enter into partnership on behalf of the firm.

    Comments
    S.19, which is one of the most important sections of the Act, lays down that subject to the provisions of section-22 (which deals with the mode of doing an act to bind the firm) 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 is called his "implied authority".

    This implied authority of a partner is often referred to as his ordinary or his apparent or ostensible authority. Lindley (the learned English author on partnership) prefers the term implied authority and the same has been accepted by the Indian Act also.

    In Bank of Australia V Breillet (1847) 6 MPC 193, the Privy Council adopted a passage from story on Agency, in which the general powers of partners as Agents of the firm have been well summed up in the following words.

    "Every partner is, in contemplation of law, the general and accredited agent of the partnership, or as it is sometimes expressed, each partner is praepositus negotils societatis, and may consequently bind all the other partners by his acts, in all matter which are within the scope and object of the partnership.

    Hence, if the partnership be of a general commercial nature-he may buy goods on account of the partnership, he may borrow money, contract debts and pay debts on account of the partnership, he may draw, make, sign, indorse, accept transfer, negotiate and procure to be discounted, promissory notes, bills of exchange, cheques and other negotiable paper, in the name and on account of the partnership."

    In order to bind the firm an act of a partner done within the scope of his implied authority, there conditions must exist-

    1. The act must be done in the conduct of the business of the kind carried on by the firm.
    2. The act must be done in the way which is usual in such business.
    3. Finally, the act must be done in the firm name or in any other manner expressing or implying an intention to bind the firm.

    The question whether a given act can or cannot be said to be done in carrying on a business in the way in which it is usually carried on must evidently be determined (a) by the nature of the business, and (b) by the practice of persons engaged in it. Evidence on both of these points is necessarily admissible. (Lindley on partnership).

    Thus, it may be usual for a partner of a banker's firm to draw or accept a bill of Exchange on behalf of the firm. However, it would not be usual for a partner in a solicitor's firm to do so.

    Examples of Implied authority of a partner.-
    1. A partner can buy on the credit of the firm any goods of a kind used in its business.

    2. Similarly, a partner may hire on the credit of the firm, any goods of a kind used in its business.

    Case.- A partner of firm, whose business it was to trap wild elephants, hired an elephant to be used for trapping wild elephants, and one of the terms of hire was that the hirer should pay Rs. 5,000/- if the elephant died during the period of hire. It was held that other partners also were bound by this term. (Mathura Nath V Sreejukta Bageshwari - 1927 4 Cal. L.J.362).

    3. A partner may engage servants or agents, and he may also discharge such persons, although he can not discharge them against the will of his co-partners.

    4. A Partner can institute and defend suits in the name of the firm. It has been held in England that a partner, who attends to the affairs of the firm has an implied authority to employ a solicitor to defend a suit filed against the firm.

    Problem.- A and B carry on business in partnership as bankers. A sum of money is received by A on behalf the firm. B does not know of the receipt. A appropriate the money to his own use. The partnership is liable to make good the money. This is an act done by a partner in the usual course of business. Therefore the firm is liable.

    It must be clearly observed that the implied authority does not come into existence unless the act is done in the usual way, and in the conduct of business of the kind carried on by the firm. Thus while a partner in a mercantile firm has an implied authority to draw, accept, & endorse bill of exchange on behalf of the firm, a partner in a firm of a solicitors has no such implied authority for it is not part of the ordinary business of a solicitor to draw, accept or endorse bills of exchange. (Karishanji V Abdul, (1941) 43 Bom. L.R. 888).

    A, a partner in a trading firm consisting of A, B, and C deposits title deeds of firm's property by way of security with a bank without B's and C's authority. The question as whether the firm is liable to the bank.- A partner in a trading firm has an implied authority to borrow money on the credit of the firm. A partner having power to borrow on the credit of the firm, may give a valid, equitable security, by deposit or otherwise over any estate of the partnership. Therefore the firm, is liable to the bank.

    In March 1988 A and B entered in to a partnership for carrying on business of buying and selling copper. On 23rd May 1988 A borrowed Rs 6,000/- from C on a promissory note passed by him in the name of the firm. The partnership business came to an end on 31st May 1988. In October 1988. C sued A and B on the promissory note. B contended that the loan was not utilised by the firm. Is B liable? Answer- As a partner of a trading firm has an implied authority to borrow, B is bound by the promissory note of A. B is therefor, liable.

    FRAUDULENT ACT OF A PARTNER.- An interesting question that arises in this connections whether a firm would be liable for the act of its partner, which though within his authority, has in fact been done in fraud upon his other partners. Now, it is a well established rule of law that a principal is answerable for the acts of his agent, including the agent's fraudulent acts, provided that they fall within the scope of his authority. The same principle approves to partners, and for the same reason, a firm can not escape liability sharing that a partners act (which falls within the scope of his authority) was actually a fraud on the firm. However, this rule does not apply to a case where there is collusion between such a partner and the third party. The rule presumes that the third party is acting bona fide, and has no knowledge of the fraud.

    19(2) Acts which fall outside the implied authority of a partner.- Sub-section 19(2) enumerates eight acts of a partner which will not bind the firm. These are acts which do not fall within his authority.

    Thus, in the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to:-

    1. submit a dispute relating to the business of the firm to arbitrations.
    2. open a banking account on behalf of the firm in his name.
    3. compromise or relinquish any claim or portion of a claim by the firm.
    4. withdraw a suit or proceeding filed on behalf of the firm.
    5. admit any liability in a suit or proceeding against the firm.
    6. acquire immovable property on behalf of the firm.
    7. transfer immovable property belonging to the firm.
    8. enter into partnership on behalf of the firm.

    It has been held that though in the absence of a specific agreement, usage or custom, a partner has no authority to refer a dispute to arbitration, nevertheless an award in such an arbitration will be binding on such partner though it may not bind the other partner of the firm.

    It may also be noted that the above enumeration of acts which falls outside the scope of a partners implied authority is not exhaustive but merely exclusive. To these may be added the following four to be found in the case law on this point.

    (a) A partner has no implied authority to bind the firm by giving a guarantee in respect of debts of third parties.
    (b) A partner has no Implied authority to set off his own personal debts against debts due to the firm.
    (c) A partner has no implied authority to set off a decree obtained by the firm for less than the decretal amount.
    (d) A partner has no implied authority to accept fully paid up shares in a company in satisfaction of a debts due to the firm.

    S. 19(2)- Authority of partner to make reference to arbitration can be challenged only by other partners and not by strangers. (Premier Insurance Co. (Pak) Ltd. V Ejaz Ahmed Khawaja 1981 CLC 311).

    S.19(2)- Implied authority of partner:-Authority of one of partners to make a reference to arbitration on behalf of other partners, held need not be in writing or in express terms, such authority may be implied and can be inferred by conduct of other partners before and after making such reference. (1981 CLC 311).

    20. 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.

    Comments
    Restriction of authority.- A third party is not affected by a secret limitation of a partner's implied authority, unless he has actual notice of it. The reason for this rule is that a third party is entitled to assume that all the partners have full implied authority.

    Thus, A and B are partners in a grocery business. The partnership deed provides that A shall not buy any thing on behalf of the firm. But A nevertheless enters into contracts to buy groceries. What is the liability of B? Following the provisions of S.20, it will be seen that B will be liable only if the person or persons with whom A had entered into such contracts had no notice of the articles of partnership which provides that A shall not buy any thing on behalf of the firm, or if the third party did not know or believe A to be B's partner.

    21. 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.

    Comments
    Under s.21 a partner has authority in an emergency, to do all such acts for purpose of protecting the firm from loss. A similar authority to act in an emergency is given to an agent by S.189 of the contract Act. It is submitted that even in the absence of S.21 a partner would be able to claim protection of said S. 189, in view of the fact that the Act expressly declares a partner to be agent of the firm.

    22. 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.

    Comments
    Act binding firm.- A firm can only be bound by what is done on behalf of the firm, even if the firm has the use of money borrowed by a partner in his own name, this is at most an evidence, but not conclusive, to show that the borrowing was in fact on account of the firm. Where a partner took some premises on lease in his own name, it was held that he did not intend to act on behalf of the firm nor to act as its benamider nor did he intend to bind the firm.

    A, one of the two partners in the Punjab Alliance Auction rooms, executed a promote in favour of the Plaintiff. The note was Signed by A describing himself as proprietor, Punjab Alliance Auction Rooms. It was held That A's description as a proprietor of the firm was not sufficient to justify the finn being held liable on the note - (Punjab Bank V Muhammad, m 15 Lah 625)

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

    Comments
    The rule contained in s. 23 is based on the corresponding provision of S.15 of the English Partnership Act.

    If a partner makes an admission regarding the partnership affairs, and such admission is made in the ordinary course of business, it will be evidence against the firm. But the rule will not apply where such representation refers to The extent of the partner's authority to bind The firm. (Ex parte Agace, 1792, 30 E.R. 145).

    It may also be noted that such an admission, though relevant is not conclusive against the firm, unless it operates by way of an estoppel. (In Re Coasters Ltd. 1911 1 ch. 86).

    24. 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.

    Comments
    This rule is based on the principle of agency, that notice to an agent is equivalent to a notice to the principal. Since partnership is form of agency, this rule applies to a partnership firm also.

    A question arose in a English case as to whether notice acquired by a partner before he became a partner would operate as a notice to the firm. The Court held that such knowledge of a partner would not operate as notice to the firm. (Williamson V Barbour 1877 9ch. 535).

    An exception is made by S.24 in cases of fraud. This is based on common sense, and when a partner is committing a fraud on his other partners, notice to him will not be notice to the firm. In Biguold v Waterhouse (1813 105 E.R.; 95), a partner of a firm of a carrier, acting in fraud of his co-partners, agreed to transport valuable parcels free of charge. The other partners were held not liable for the loss of the parcels. The fact that some clerks in the firm were aware of the fraud was not to affect the innocent partners.

    Likewise, if a partner who is also a trustee of a trust, employs trust funds in the partnership business his guilty knowledge can not be imputed to the firm. (Mare V Browne 1896 1ch. 199)

    25. 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.

    Comments
    Sec. 25 of the Act lays down that all the partners of a firm, jointly and severally, share liabilities of the firm therefore, even where a partner has signed in his own name a promissory note for the benefit of the firm, all partners are liable on it as members of the partnership. (AIR-1930 Mad 168 (BE).

    26. 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.

    Comments
    Torts of Partner. The word injury in Sec. 26 implies a Tort The liability of a firm for the torts of a partner rests on precisely the, same principles as the liability of a master for the tort of his servant, in as much as both are merely branches of the law of principal and agent.

    Both under English and Indian law of Courts, partners are liable jointly and severally for wrongful act committed by a partner acting in the ordinary course of the partnership business. The principle underlying this is that the other members hold him out to the world as a person for whom they are responsible.

    Thus in Hamlyn V Houston & Co., (1903) I K B. 81) one of two partners without the knowledge of his co-partner, bribed a clerk of the plaintiff, a competitor in trade, and induced him, in broach of his duly to his employer, to divulge confidential information in regard to the plaintiff's business. It was in the ordinary course of business of the firm to obtain such information by legitimate methods, and the partner acted in the interest of the firm. Both partners, were, held liable to the plaintiff.

    But a wrongful act or default of a partner when not acting in the ordinary course of business of the firm, does not render the other partners responsible for the same.

    Venkat v Nafesa (1939) 1. M.L.J. 905,. In This case, N and K entered into a partnership to supply goods to jails. K provided finance for the partnership business and N did the work. K. paid bribes to officials and entered the amounts in the account books of the partnership as items of expenditure. N. in his turn also spent partnership funds in paying bribes. In a suit filed by N against K for the dissolution of partnership and taking of account objected to the amounts spent in bribery by K. The Court held that neither N nor K was entitled to debit the partnership with moneys spent for an illegal purpose.

    Problem.- A customer of a banking firm deposits with the firm a box containing securities. He afterwards authorises one of the partners to take out some of these and replace them by certain others. The partner not only makes the changes he is authorised to make in the contents of the box, but makes other changes without authority, and converts the customer's securities to his own use. Discuss the liability of the firm for the loss.

    Ans.- Here it is evident; that the firm is not liable to make good the loss, as the separate authority given to one partner by the customer shows that he elected to deal with that partner personally, and not as agent of the firm. (Exparte Eyre, (1842) 1 ph 227.).

    27. 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 properly 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.

    Comments
    Problems.- (1) X, Y and Z were partners in a firm of Bankers, of whom Z was not an active Partner. C, a customer of the firm deposited his ornaments with the Bank for safe custody, X and y sold the ornaments without authority from C what are the rights of C against the Bank? What is the liability of Z.?

    Ans.- In this case, it will be seen that the ornaments of C were received by the firm of Bankers in there Course of business for safe custody. X and Y active partners of the firm, had sold ornaments without any authority form C, the owner. Hence the firm is liable to make good the loss, C can recover the amount from the firm (S.27). Though Z is a dormant partner, he is also liable along with X and Y to make good the loss (S25). But Z is entitled to be indemnified by X and Y under Sec. 10 of the Act. (Deraynes V Noble (1816) 1 Mer 572).

    (2) X end Y, solicitors, carry on their business in partnership. Z. a client of the arm, hands over some of money to X to be invested in a specific security. X does not Invest this money, but applies it to his own use. Y does not receive any part of the money, and does not even know of this transaction can Y be made liable to make good this loss? would it make any difference if Z had given the money to X with general directions to invest the same?

    Ans.- In the former case, Y would be liable to make good the loss because it is part of the ordinary course of business of solicitors (in England) to receive money from clients for investing the same in specific securities (Blair V Bromley, 1837 2 P2. 534).

    If, however, Z had given the money to X with general instructions to invest the same. Y would not be liable, as it is no part of the ordinary business of solicitors to receive money to be invested at their discretion. (Harman V Johnson, 1853 Z E & B.61).

    28. Holding out:
    (1) Any one who by words spoken or written or by conduct represents himself, or knowingly permits himself to be represented, to be a partner in a firm, is liable as a partner in that firm to any one 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 a partner's death the business is 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.

    Comments
    Liability by Holding out. S.28 of the Act deals with what is known as liability by "holding out". Where a person represents himself or knowingly permits himself to be represented as a partner in a firm, he will be liable as a partner in that firm, to any one who, on the faith of any such representation, has given credit to the firm. The person so representing himself, or permitting himself to be so re-presented is known as a partner by holding out or a partner by estoppel. Even want of knowledge on his part of the effects of his acts and conduct would not absolve him from liability.

    In otherwords where a man holds himself out as a partner, or a allows others to do it, he is then estopped from denying the character he has assumed upon the faith of which creditors may be presumed to have acted. A man so acting may be rightly held liable as a partner by estoppel. In other words, the doctrine of "holding out" is a part of the principle of estoppel, which lays down that where one person, by words or conduct induces another to believe him and act upon the existence of a particular state or facts, he can not afterwards, as regards that person, deny the existence of such facts.

    Thus A is in the habit of representing himself to be a partner of a particular firm. B on the strength of such representation, and without giving any notice to A supplies goods on credit to the firm. A would be liable as a partner to B for the price of the goods.

    It will thus be seen that liability by holding out is merely a special application of the principle of estoppel enunciated by S-154 of the Indian Evidence Act, 1872.

    ESSENTIALS OF S. 28.- In order to estop a person from denying that he is a partner on the doctrine of "Holding out", the following two important elements must co-exist.

    1. A person must represent himself to be a partner in a firm, or knowingly permit himself to be represented and

    2. Another person must have given credit to the firm on the faith of such representation.

    The following seven additional points may also be noted in connection with the doctrine of holding outs.

    (i) The representation may be express or implied it need not necessarily be by words spoken or written, it need not be made by the person himself, but may be made by others.
    (ii) There will be no representation by conduct if the acts relied upon are ambiguous.
    (iii) A general representation to the, world at large is not sufficient, unless the person who gives credit can satisfy the court that he was aware of, and acted upon it to his prejudice.
    (iv) To establish liability, it is not essential to show that the party making the representation (or permitting it to be made) has acted fraudulently or negligently. Even want of knowledge on his part, of the effects of his acts and conduct, would not absolve him from liability, if his acts and conduct were such as would induce a reasonable man to believe that he was a partner, and to act upon such belief. The main thing is whether the representation has caused the person to whom it was made to act on the faith of it so as to alter his position.
    (v) A former owner does not become a partner by estoppel merely because the firm has continued to use its old name of which his own name forms a component part. The rule of estoppel is binding on a former partner who has retired without giving proper notice of his retirement.
    (vi) There is no liability in tort on the ground of holding out, because the injured person can not claim that he was led to suffer the injury by his belief in any representation. Thus, B allowed his name to appear on a traction engine. A hired the engine, and through his negligence, injured C C sued B on the ground of "holding out". It was hold that B was not liable.
    (vii) There can be no holding out to a person who is aware of the actual facts e.g. a person who has Inspected the register of a firm which has been registered under the Act.
    EFFECTS OF HOLDING OUT.- If a person holds himself out to be a partner of a firm, he becomes personally liable, he does not thereby become a partner in the firm and he is also not entitled to any rights as against those who are in fact partners in the firm. By holding out to be a partner, he does not become an agent of the firm. He merely makes himself personally liable for the credit given to the firm on the faith of his representation.

    29. 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 n 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.

    Comments
    Can a partner transfer his interest in the firm?- The wording of S. 29 clearly suggests that he can. A transfer by a partner of his interest in the firm may be either absolute, or by mortgage, or by creation by him of a change on such interest. However the fundamental principle underlying the law of partnership is that a stranger can not be foisted upon the remaining partners against their will. Consequently, even when a partner transfers his interest in firm, the transferor does not cease to be a partner; nor does the transferee become one S. 29 of the act deals with such transferee's rights, both during continuance of partnership, and after its dissolution.

    S29 (1) can be analysed Thus-

    During the continuance of the partnership, the transferee of a partner's interest is not entitled to.

    (1) interfere in the conduct; or
    (2) inspect accounts; or
    (3) inspect the books of the firm.
    Rights of a transferee of partner's Interest.- S.29(2) lays down that 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 of the assets of the firm, and for this purpose, is also entitled to an account as from the date of dissolution.- (1980 CLC 1283 = LLJ 1980 Lah 603).

    30. Minors admitted to the benefits of partnership:
    (1) A person who is 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 persons asserting that fact.

    (7) Where such person becomes a partner,-
    (a) his rights and liabilities as a minor continue up to 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 to become a partner, -

    (a) his rights and liabilities shall continue to be those of a minor under this section up to the date on which he gives public notice.
    (b) his share shall not be liable for any acts of 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-section (7) and (8) shall affect the provisions of section 28.

    Comments
    S.30 of the Act deals with the right liabilities and disabilities of a minor in a partnership.

    At the very outset S.30 lays down that a minor can not be a partner in a firm but, with the consent of all the partners, he may be admitted to the benefits of partnership.
    Minor Cannot be a partner. A minor is not a partner but is only entitled to the benefits of partnership therefore the respondents who are shown as minors in the plaint are not entitled to declaration that they are partners but only to a declaration that they are entitled to the benefits of partnership under S.30 of the Partnership Act - (Muhammad Ishaque V Erose Theatre-PLD-1973 kar. 522)

    A minor not Competent to Contract. Since a minor is not competent to contract (S. 11 of contract Act), and, therefore cannot be a partner of a firm. (Sanyasi Charan Mandal V Krishnadhan Banerji, 1922 LR.49) Needless to say, there cannot be a partnership wholly of minors (Shivaram V Gaurishankar NR 1961 Bom 136). The Punjab High Court has laid down that if a minor is made full fledged partner, the entire partnership deed is invalid not only Vis-a-Vis the minor, but also with respect to the other partners who are not minors.

    The Act does not lay down as to which are the acts which would amount to admitting a minor to the benefits of a partnership No doubt there must be some definite act on the part of the partners, such as the allotment of a sham or a distribution of a part of the profits, or any other similar act.

    Such a minor has a right to a share of the property and 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.
    Rights of a minor. The following seven fights of a minor are to be deduced from S.30 viz.

    1. He may be admitted to the benefit of a partnership.
    2. He may have access and inspect and copy of the accounts of the firm.
    3. He has right to share the property and profits of the firm.
    4. He may sue for accounts on severing the connection with the firm.
    5. On attaining majority, he has the option of becoming a partner in the firm in which case he will be entitled to the share to which he was entitled as a minor.
    6. On attaining majority, he also has the option of severing his connection with the firm, in which case his share is not liable for any act of the firm done after the date of public notice that he has elected not to become a partner. He is also entitled to sue the partners for his share of the property and profits.
    7. Lastly, he is not personally liable for any acts of the firm during his minority, he cannot be adjudged insolvent if the debts of the firm cannot be satisfied out of the property of the firm.
    S.30(3) Liabilities of a Minor. The following are three liabilities of a minor admitted to benefits of a partnership-

    1. His share is liable for the acts of the firm, but he has an option of severing his connection with the firm within six months of his attaining majority or of his obtaining knowledge that he had been admitted to the benefit of partnership, whichever date is later.
    2. If, on attaining majority, he elects to become a partner, he becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of the partnership.
    3. After attaining majority and before giving public notice, he may be liable for holding himself out as a partner.

    S.30(5)- In view of sub-section (5) of S.30 of the Act a minor can not become a partner of a firm automatically on attaining majority, he can become a partner only by electing to join the firm with manner prescribed in the sub-section. (PLD-1973 Kar 522).

    In case such person, on attaining majority, fails to give public notice within six months of majority, that he has elected to become or that he has elected not to become a partner in the firm, than he becomes a partner in the firm on the expiry of the period of six months.
    Where such person elects not to become a partner.

    (a) his rights and liabilities continue to be those of minor under this section upto the date on which he gives public notice.
    (b) his share is not liable for any acts of the firm done after the date of the notice, and
    (c) he is entitled to sue the partners for his share of the property and profits.

    Last edited by The Revivalist; 09-27-2011 at 08:27 AM.

  7. #6
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    Re: The partnership act, 1932


    CHAPTER-V:Incoming And Outgoing Partners.

    CONTENTS OF THIS CHAPTER:
    31. Introduction of a partner.
    32. Retirement of a partner.
    33. Expulsion of a partner.
    34. Insolvency of a partner.
    35. Liability of estate of deceased partner.
    36. Rights of outgoing partner to carry on competing business. Agreements in restraint of trade.
    37. Right of outgoing partner in certain cases to share subsequent profits.
    38. Revocation of continuing guarantee by change in firm.


    CHAPTER - V
    Incoming And Outgoing Partners

    31. 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 30, 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.

    Comments
    S.31 provides that no person can be introduced as a partner into a firm without the consent of
    all the existing partners. Where one of the partners of a firm transfers his share in the firm without the consent of the other partners the transferee does not get the status of a partner in view of S. 31, Partnership Act. He has only limited rights and can claim only a share of the profits to which the transferor partner was entitled. (AIR-1963 Pat. 149 (DB).

    It may be noted that there is nothing to prevent an incoming partner agreeing with his co-partners to make himself liable for the debts incurred by the firm prior to his admission therein. But, even where he has so agreed the agreement does not confer any right on creditors of the old firm to impose the old debts on the new partner. They can acquire such a right only by entering into an agreement between themselves and the new partner, either expressly or by implication.

    The only way in which a new partner can be made liable to the creditors of the firm in respect; of past debts is by proving:-

    (1) That the re-constituted firm has assumed the liability to pay the debt, and
    (2) That the creditor concerned has agreed to accept the re-constituted firm as his debtors, and discharge the old firm from its liability.

    32. Retirement of a partner:
    (1) A partner may retire --

    (a) with the consent of all the other 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 partner.

    (4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm.

    Comments
    S.32(1)- Lays down three rules as to how a partner can retire. It says that a partner may retire-
    (1) with the consent of all the other partners, or
    (2) in accordance with an express agreement by the partners, or
    (3) where the partnership at will, by giving notice in writing to all the other partners of his intention to retire.

    S.32(2)- Thus A, B and C are partners. A retires, and a new partner X is introduced into the firm. X agrees to take over the liability of A. D, the creditor agrees with A and the reconstituted firm of B, C and X that he will look only to the new firm for the payment of debt A, the retiring partner, is discharged from liability to D.

    Problem- A, B and C are partners in a firm X & Co., C retires from the partnership, and all the assets and liabilities are taken over by the two partners, A & B who carry on the firm after the retirement of C. A creditor of the firm before the retirement of C files a suit against A, B and C for the recovery of his debt after the retirement of C. Is C liable?

    Ans- Yes he is liable u/s 32(2).

    Moreover, notwithstanding the retirement of a partner from a firm, such a person and the remaining 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.

    However, a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner. S.32(3). The notice may be given by the retired partner or by any partner of the reconstituted firm S.32(4).

    Thus A, B and C are partners, C, who is an active partner retires without giving public notice of retirement. A and B in carrying on the old business incur a liability towards X. C is also liable to X.

    Liability of partners to third parties. Public notice of dissolution of firm not given. Actual and individual notice given by a partner to parties concerned held, on a better footing and affords higher protection to such partner. (Tariq Mohsin Siddiqui V Province of Sind: PLD 1976 Kar 728).
    Mode of Public Notice- S.72 of the Act lays down the rules relating to giving of public notice.

    33. 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 of 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.

    Comments
    S.33 deals with expulsion of a partner. It lays down that a partner cannot be expelled from a firm by any majority of the partners, save in the exercise, in good faith of partners conferred by contract between the parties.

    All the provisions which apply to a retired partner also apply to an expelled partner.
    Power of Expulsion how exercised. A power to expell a partner can only be conferred by an express agreement between the partners. Even where such a power is conferred by the terms of the partnership agreement, it can only be exercised by a majority of the partners and it must be exercised in utmost good faith. Reasonable warning and opportunity of explanation must be given. An irregular expulsion, being wholly in-operative, the parson against whom it is directed does not cease to be a partner, he may claim reinstatement in his rights as a partner, but he cannot recover damages for wrongful expulsion. (It is indeed difficult to understand as to why a partner who has been infact wrongfully expelled and demnified should not have the right of action of damages).
    Short note on Expulsion of a partner. As stated above, S.33 provides that all the rules which govern the liability of a retired partner to third parties will apply in the case of an expelled partner. It places an expelled partner on precisely the same footing as a retired partner, as regards his liabilities for existing and future debts of the firm. S.33 regard expulsion in the same way as sec-32 regards retirement, that is, it makes the assumption that the firm continues after expulsion without a dissolution of partnership as between the remaining partners.

    34. 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 alter the date on which the order of adjudication is made.

    Comments
    Effects of Insolvency of a Partner- The insolvency of a partner does not invariably result in dissolution of the firm, for it is open to the partners to agree that the adjudication of a partner as an insolvent will not dissolve the firm as regards the continuing partners. Sec.34, 41 (a), 42 (d) and 47 may conveniently be read together when dealing with the effect of insolvency of one or more partners in a firm.

    The effects of the insolvency may be summed up as follows:

    (i) The partner adjudicated an insolvent ceases to be a partner on the date on which the order of adjudication is made.
    (ii) The firm is dissolved on the date of the order of adjudication, unless there is a contract to the contrary. (S.42).
    (iii) If all the partners, or all the partners but one are adjudicated insolvent, the firm is automatically dissolved. S.41(a).
    (iv) The estate of the insolvent is not liable for any act of the firm after the date of the order of adjudication. Adjudication as an insolvent is a notorious event, and no further notice thereof is required to old or new customers of the firm. S.34.

    (v) After the dissolution of the firm, the firm is not bound by the acts of a partner who has been adjudicated insolvent. However, this would not affect the liability of any person who has, after such adjudication, represented himself or knowingly permitted himself to be represented, as a partner of the insolvent. (S.47)

    35. Liability of estate of deceased partner:
    Where under a contract between the partners the farm 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.

    Comments
    Death of a partner. S.35 deals with the liability of the estate of a deceased partner. It provides that where by virtue of contract, a farm is not dissolved on the death of a partner, the estate of the deceased partner is not liable for any act of a firm after his death.

    36. 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) Agreements 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 o that of the firm within a specified period or within specified local limits; and, notwithstanding anything contained in section 27 of the Contract Act, 1872, IX of 1872 such agreement shall be valid if the restrictions imposed are reasonable.

    37. 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 or 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.

    Comments
    The provisions of S.37 comes into play only in the absence of a contract to the contrary. Where the agreement of partnership leads to the conclusion that the heirs and legal representatives of a deceased partner were to become partners of the firm, and the accounts of the deceased partner shall be made up only if those heirs were not willing to continue as partners, this section does not apply (PLJ-1977 SC 104 = PLD-1977 SC 109).

    "Contract to the Contrary"- Words "contract to the contrary" as they occur in this section relate only to the option of the alternatives prescribed in the section and not to the entitlement of outgoing partner to the profits. Statutory right created by provisions of this section can be waived by agreement between parties. (Shamshuddin v Inamuddin, PLD-1982 KAR 327).

    Right of outgoing partner.- A and B are partners. The partnership is dissolved by consent, and it is agreed that the assets and business of the firm would be sold in auction. A, nevertheless, continues to carry on the business on the partnership premises, and with partnership property and capital, and on his own account. What are B's rights? A must account to B for the profits thus made, alternately, B may claim 6% interest on his share.

    Rights of minor heir and purchaser of interest of outgoing partner- A firm consisted of four partners A, B, C and D. A died leaving a minor son X. B sold his interest in the firm to Y. The remaining partners thereupon continued the firm as they were entitled to do. What are the rights of X and Y? Can they insist on being admitted as partners? X and Y cannot insist on being admitted as partners, for a partnership can only arise as a result of a voluntary agreement, express or implied between two or more persons. But each of them can claim a share in subsequent profits under S.37.

    38. 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.

    Comments
    Thus A becomes a surely to the firm of "N.C Mookerji" for B's conduct as cashier to the firm. The constitution of the firm is subsequently changed and its name is altered to "N Mookerji & Sons". A is not liable for B's defalcation subsequent to the change. (Neel Comul Mookerjee V Bipro Das Mookerjee- 1901 28 Cal. 597).


  8. #7
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    Re: The partnership act, 1932


    CHAPTER-VIissolution of A Firm:

    CONTENTS OF THIS CHAPTER:


    CHAPTER - VI
    Dissolution Of A Firm

    39. Dissolution of a firm:
    The dissolution of partnership between all the partners of a firm is called the "dissolution of the firm".

    Comments
    This Chapter contains Sections - 39 to 55, which lay down the rules regulating the dissolution of a firm. S.39 lays down that the dissolution of partnership between all the partners of a firm is called the 'dissolution of the firm'.

    The various way of dissolution of Firm- The dissolution of a firm may take place in one of the following five ways.
    1. As a result of an agreement between all the partners: S.40.

    2. Compulsory dissolution, i.e.,
    (a) By the adjudication of all the partners, or of all the partners but one, as insolvent: S.41 (a). (b) By the business of the firm becoming unlawful: S.41(b).

    3. Subject to agreement between the partners, on the happening of certain contingencies, such as-
    (i) efflux of time;
    (ii) completion of the adventure for which it was entered into;
    (iii) death of a partner; and
    (iv) insolvency of a partner: S.42.

    4. By a partner giving notice of his intention to dissolve the firm, in case of a partnership at will: S.43.

    5. By intervention of the Court in case of
    (i) a partner becoming of unsound mind;
    (ii) permanent incapacity of a partner;
    (iii) misconduct of a partner affecting the business of the firm;
    (iv) willful or persistent breaches of agreement by a partner;
    (v) transfer or sale of the whole interest of a partner;
    (vi) improbability of the business being carded on save at a loss;
    (vii) the Court being satisfied on any other equitable ground that the firm should be dissolved: S.44.
    The above can be summarised in a tabular form thus-

    DISSOLUTION
    A. Without interference of Court. B. By order of Court. (S. 44)
    (1) By agreement (S. 40) (2) Compulsory dissolution (S. 41) (3) On the happening of certain contingencies. (S. 42) (4) By Notice (S. 43)
    (a) By the insolvency all or all but one, partners. (S. 41(a)] (b) By the business becoming unlawful (S. 41(b)]
    40. Dissolution by agreement:
    A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners.

    Comments
    A firm may be dissolved.
    (a) with the consent of all the partners or
    (b) in accordance with a contract between the parties.

    Clause (a) is an application of the general rule of law which lays clown that a contract can be discharged by mutual agreement.

    Clause (b) covers a case where dissolution occurs in pursuance of a contract previously made, the most common example being that of a clause in the partnership deed itself providing for dissolution in certain events.

    Dissolution of partnership- Partnership deed containing contract for the determination of partnership. Not a partnership-at-will. Dissolution of such partnership, held, would be governed by 8.40 and provisions of S.43 will not apply. In courts opinion section-43 has no application in the case where the old partnership was not a partnership at will as defined in S.7 of the partnership Act, as there was a contract under the old deed of partnership for the determination of the partnership, though there was no contract regarding duration of the same. The Court was of the view that S.40 which provides for dissolution of partnership with the consent of all the partners, was applicable to the present case. (Eastend Agencies v Mafizuddin PLD-1970 Dacca, 155).

    41. 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 carded 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.

    Comments
    Case - A and 10 others form a partnership and carry on a particular trade later, the legislature passes an act which makes it un-lawful for more than 10 persons to carry on that trade in partnership. The partnership is dissolved.
    X domiciled in England carries on business in partnership with Y. Domiciled in Germany, war breaks out between England and Germany. The partnership between A and B is dissolved. (Griswold V Waddington, (1818) Supreme Court. N.Y.15 Johns 57).

    42. 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.

    Comments
    Dissolution of Firm. Activities for which firm constituted coming to an end, firm can not function and stands dissolved on its own death. Contention that it would be very harsh if a firm having run for many years could be dissolved without even formality of notice held, without merit - Hussain Bhai V Muhammad Iqbal and 2 others. PLD 1976 Quetta 9.

    Time limit for suit after dissolution. Suit for accounts and share of profits of the dissolved partnership. Whether should be brought within three years of the date of dissolution. Held, Yes.- (Zainab Bai V Ibrahim (1981) 43 Tax 26 (H.C. Kar)).

    43. 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.

    Comments
    Dissolution deed stated a particular partner not to share profits, partnership came to an end. The mere fact that two persons decide or undertake to share the losses of a business would not convert them into partners or their association into a firm. Conversely if they agree to share profits but not the losses, the firm would nonetheless have been formed. The question of profits is a matter interse the partners. In the present case in the dissolution deed it was categorically stated that a particular partner would not be entitled to any profits. The partnership, therefore came to an end. (Muhammad Afzal Khan V Manzoor Ellahi - PLD- 1975 Lah 1276).

    Receipt of Notice presumed. Dissolution of partnership at will, Retirement of partner can be effected by written notice to all other partners of intention to retire. Not necessary to send notice by registered post A.D., or to obtain receipt. Dissolution simpliciter of partnership also takes effect by notice in writing. All partners signatories to dissolution deed and such deed acknowledging receipt of notice. Notice presumed - PLD. 1975 Lah 1276).

    Personality of original firm changed, even if business of firm continued. Whenever the constitution of a firm changes by the addition of new members as partners, there is a break in the identity of the firm whether or not the name continues to be the same. After a change in the constitution of the firm by the addition of new partners what formerly was the property of the old firm does not continue to be the property of the old firm. Such a new firm is an entirely different assessable entity, and as such not entitled to avail of the unabsorbed depreciation of the previous year which accrued to a different person - (Rivoli theatres V Commissioner of I.T.- 1971 SCMR 621).

    44. 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 an 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, willfully or persistently commits breach of agreements relating to the management of the affairs of the firm or 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 provision of rule 49 of Order XXI of the First Schedule to the Code of Civil Procedure, 1908, V of 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.

    Comments
    Section - 44 lays down the seven Important cases in which the Court can order dissolution of a firm, in consequence of a suit filed by a partner to this effect.

    (a) under this clause a suit for dissolution becomes necessary to protect the interest both of the insane as well as the other partners.

    (b) the incapacity mentioned in this clause may be due to illness, mental or physical. However, such illness should be of permanent nature. Thus, in one English case, it was held that the paralysis of a partner was not a ground of for dissolution of the firm, as the medical evidence showed that the attack of paralysis was only temporary (whitwell V Arthur, 35 Bear. 140)

    (c) under this clause, moral turpitude of a partner would be a sufficient ground. Professional mis-conduct would also suffice. Thus, misapplication by a solicitor and adultery by a doctor have been held to be sufficient grounds.

    Although it is no necessary that such misconduct should be connected with the business of the firm, it should be of such a nature that it would damage the business prospects of the firm. Thus, a Court conviction for travelling without a ticket. (Carmichael V Evans, (1904) 90 LT 573), or breach of trust (Essel V Hayward (1860 30 Beav. 130) have been held to be sufficient grounds.

    However, mis-conduct in one’s private life may not be a sufficient ground. in Snow V Milford (1868 18 LT 142), a partner of a firm of bankers had committed adultery with several women in the city where the banking business was carried on, and his wife had also left him. When the other partners applied for dissolution on this ground, the Court dismissed the suit, Lord Romilly observing as follows-

    "I am of the opinion that however much court may reprove the conduct of a man who is guilty of adultery, that is no reason for turning him out of a common trading partnership. In the case of bankers, how can the court say that a man's money is less safe because one of the partners commits adultery.

    (d) under this clause it has been held that destroying old accounts books, preparing false balance sheets, and making false entries in books are sufficient grounds.

    (f) the reason for the ground erisaged in this clause is that the motive of every partnership is the acquisition of gain if, therefore, the business can be continued only at a loss, it would be a good ground for the Court to dissolve such a partnership.

    (g) under this clause all such grounds are covered as are rendering it just and equitable to dissolve any form.

    Thus, if the substratum of the partnership is gone, or if there is a deadlock between the partners, the court may wind up the partnership on the ground that it is just and equitable to do so.

    As regards the just and equitable clause, Lord Lindley has rightly remarked that the court ought not to fetter itself by any rigid rules in this regard. This clause can not be construed to be ejusdem generis (i.e. of the same type as) with the other six which precede it. In fact, an application of the ejusdem generis rule of construction would not leave any room for the clause to operate. However, the word "just and equitable" connote something more than mare inconvenient. A mere opinion of a judge that dissolution of a firm would, on the whole, be the best course for that firm, would not be enough.

    The exercise of the power by the court under this clause is discretionary. However, this discretion is judicial discretion, and must be exercised with due regard to the circumstances and exigencies of the case. On the other hand, this discretion ought not to be crystallized by decisions laying down definite rules on the point. Rather, the court should have untrammeled discretion of deciding each case on its own merits.

    45. 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 alter the date on which he ceases to be a partner.

    (2) Notices under sub-section (1) may be given by any partner.

    Comments
    Sections 45 to 55 of the Act lays down the liabilities and rights of partners after dissolution of firm. They lays down the rules for the guidance of the partners.

    Section - 45 speaks of a liability of a partner after dissolution. The principle on which this provision is based is that after dissolution of a firm, persons dealing with its partners are entitled to assume that they continue to be each others agents, until public notice is given of the dissolution. It is only fair and equitable that a secret dissolution should not be allowed to prejudice the rights of third parties who have continued to deal with the firm in ignorance of the dissolution, and upon the assumption that the relationship of partnership has continued.

    Ex-parte Robinson (1883) 3 Dea & Ch 376.- A and B partners in trade agree to dissolve the partnership and execute a deed for that purpose, declaring the partnership dissolved as from January 1st, but do not discontinue the business of the firm or give notice of the dissolution. On February 1st. A endorses bill in the partnership name to C. Is the firm liable on this bill yes, the firm is liable v/s 45(1).

    But 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.

    Thus there are three cases where no notice of dissolution need be given, namely:-
    (i) where a partner dies
    (ii) where a partner is adjudicated insolvent
    (iii) where a dormant partner (a partner who was not known to the third party to be a partner) retires.

    Liability of partners for acts done after dissolution - A person dealing with firm notified of dissolution of partnership cannot take protection under S.45, unless objection taken there and then on receipt of notice. (Muhammad Afzal Khan V Manzoor Elahi - PLD 1975 Lah - 1276).

    46. 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 their representatives according to their rights.

    Comments
    On the dissolution of a firm every partner is entitled to have the property of the firm and to have the surplus distributed among the partners (or their representatives) according to their rights.

    Equitable lien of a partner.- In order to discharge himself from the responsibility to which a partner is subject, every partner has a right to have the property of the firm applied first in payment of the debts and liabilities of the firm, and in order to secure his proper share of the assets of the firm among the partners or their representatives, according to their rights. This right is called an equitable lien of a partner. Although it exists during the partnership, it is not so much in evidence during the continuance of a firm, but it comes into full play in the event of its dissolution.
    Pollock defines equitable lien as a partner's "right to have a specific portion of property dealt with in particular way for the satisfaction of specific claims." It is thus distinct from a "possessory lien", which is a mere right to hold the goods of another man until he makes a certain payment, and which does not carry with it the right of dealing with the goods.

    47. 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 has 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.

    Comments
    Partnership subsists for winding up.- Dissolution of partnership on death of partner. Notwithstanding dissolution, surviving partner can withdraw deposit for purpose of winding up affairs of firm. Partnership, however, would subsist merely for purpose of winding up its business and adjusting rights of partners interse. Surviving partner seeking withdrawal of deposit from a Bank, not for winding up affairs of company but for his own sole proprietary use. Bank in circumstances, held, was justified in withholding payment till succession certificate was produced - (Abdul Rashid V Bank of Tokyo Ltd., PLD- 1974 Kar-411).

    A partner is an agent of the firm for the purposes of the business of the firm. (S. 18). The general rule is that the agency of a partner is terminated by dissolution of the firm. But even after dissolution of the firm, it is necessary that someone should have authority to wind up the affairs of the firm. Hence S.47 provides that 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-

    (1) to wind up the affairs of the firm, and
    (2) to complete the transactions begun but unfinished at the time of dissolution, but not otherwise. Thus, after the dissolution of the firm, a partner has no authority to acknowledge a debt or to make a part payment, because it is not necessary for the winding- up.

    It is to be noted however, that the firm is in no case bound by the acts of a partner who has been adjudicated insolvent. But a person, who represents himself for knowingly suffers himself to be represented as the partner of an insolvent will be liable for the latter's act. (Proviso to S.47).

    Woodbridge V Swann (1833) 4B & Ad. 633 - A and B are partners. A becomes bankrupt. B continues to carry on the trade of the firm and pays partnership money into a bank to current bills of the firm. A's trustee in Bankruptcy claims these moneys from the Banks. Here, the Bank is entitled to these moneys as against A's trustee in Bankruptcy.

    48. Mode of steelement 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 ratably what is due to him from the firm for advances as distinguished from capital;
    (iii) in paying to each partner ratably 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.

    Comments
    Mode of settling accounts and division of profits and lossess- Illustrations- 1. A and B were partners, the agreement between them being that the profits and losses of the business were to be shared equally. A died and on an account of the partnership being taken, it is found that he contributed pound 1929 to the total capital of the firm, and B contributed only pound 29. The assets amount to pound 1400. The loss to the firm - total capital pound 1929 + pound 29 = pound 1958 -pound 1400 = pound 558- loss to each partners = pound 279 B's contribution being only pound 29 will have to pay pound 250 - thus A will get pound 1400 + pound 250 = pound 1650.

    2. A and B carry on business in partnership. The firm holds lease holds for the purposes of the business. A dies. Before file affairs of the firm are completely wound up the lease expires, and B renews it. Is the renewed lease a partnership property?

    Ans.- A lease renewed by a surviving partner in the interval between dissolution and actual winding up ensures to the benefit of the partnership. Therefore, in the given problem, the renewed lease is partnership property (Clements V Hall (1857) 2 De to & J 173).

    3. A, B and C were partners under an agreement under which they were to share equally in the profits and losses of the firm. In a suit between them for dissolution and accounts, it is ascertained that the contributions of A, B and C to the capital of the firm were Rs. 10,000/-, Rs. 5000/- and Rs. 1000/- respectively. The assets of the firm, after paying debts of the firm and advances made by the partners as distinguished from their contributions to the capital of the firm, are Rs.7000/- The deficiency of capital (which must be regarded as losses) being Rs.9000/- each partner has to contribute to the assets an equal share of the deficiency i.e. Rs.3000/- each. After this is done, the assets then available, viz., Rs.7000 + Rs.9000 = Rs.16000 will be distributed between the partners with the result that each partner will have suffered a loss of Rs.3,000/- In actual practice, it will not be necessary for A and B to pay Rs.3,000 each actually in cash, but the matter will be worked out on the basis of notional contributions so that C, whose contribution was Rs.l,000 only will have to pay Rs.2000 and out of the amount of Rs.7000 + Rs.2000 = Rs.9000, A will take Rs.7,000 and B Rs.2000.

    4. Difficulty, however arises when the assets are insufficient to pay the partners, because a partner has become insolvent and nothing is recoverable from him. Thus in the above case, if the C is insolvent, and nothing is recoverable from him, the assets will be distributed as follows - A and B will have in the first place to contribute their shares of deficiency of capital i.e. Rs.3000 each. The assets then available Rs.7,000/- + Rs.3,000 + Rs.3,000 = Rs.13,000 will be distributed between A and Bin the proportion of their contribution to the capital i.e. in the proportion of 2 to 1. The ultimate result will be that A on the whole will have lost Rs.4,333-1/3 and Rs.3,666-2/3 and B Rs.3,666-2/3.

    Advances made by partners beyond amount of capital.- Partners entitled to interest on advances made at rate prescribed by law and entitled to be reimbursed in that regard from the assets of the firm. Petitioners being creditors in respect of advances made by them, held, entitled to be re-imbursed in respect of them with usual interest. (Rustom F. Cowasjee and 5 others V Government of Pakistan, through Secretary, Ministry of Communication and another. PLD 1981 Lah. 1).

    Determination of profits of partnership. Profits of a period of six years before filing of suit were determined from statement of accounts on record and profits which .had accrued during pendency of suit were also taken into account, till business of partnership was sealed. Capital of firm having been subscribed equally by predecessors of plaintiffs and defendant. Entitlement of profits would also be equal as between descendants of both the partners.- (1988 CLC 1882).

    49. 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 be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm.

    Comments
    When the partnership assets are not sufficient to pay of the joint debts of the firm, the creditors of the firm can have recourse to the partner's separate property only after his separate creditors have been paid. A partner is not entitled to insist that a creditor of the firm should proceed against the assets of the firm before proceeding against the partners individually. in order to discharge the joint debts of the firm after its dissolution, each partner has a lien over the partnership property.

    A, B and C carrying on business in partnership, enter into a contract with D for the sale of 500 bales of cotton. By reason of their failure to perform the contract, they become liable to pay to D. Rs. 9000 as damages for the breach. Soon thereafter, A dies, and in consequence the partnership is dissolved. D, thereafter accepts Rs. 2000 from B and agrees not to hold him liable for the balance. Consider whether the estate of A and whether, C are liable to D and if so to what extent and whether there is any liability whatever outstanding so far as B is concerned.

    Partnership debts are to 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. Therefore on the dissolution of the partnership, Rs. 9000 which is a partnership debt, ought to be paid according to the rules stated above. if there is no profit and also if them is no capital out of which the debt may be paid, then the partners, A, B and C become personally liable. On the death of a partner, his estate continues to be liable. The separate property of any partner is to be applied first in the payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm. Under Sec. 43 of the Contract Act, joint liability is considered as joint and several and the promisee may hold all or anyone of joint promisors liable. S. 44 of the said Act provides that a release of one of the joint promisors by the promisee does not discharge the other joint promisors. Therefore release of B of the balance does not discharge A's estate and C. Thus D may recover the balance of Rs. 7,000/= from any of them or both. As regards the liabilities of the partners inter-se sec. 13(2) of the Act provides that subject to Contract between the partners they shall contribute equally to the losses sustained by the firm, so B & C are separately liable to Rs. 3,000/-- each into A's estate. Again, release by D does not discharge B from liability (to contribute) to A's estate and C, who might have paid mere of their shares of loss. Thus B is liable to the extent of Rs. 1,000/=.

    50. 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 a 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 goodwill of the firm, nothing in this section shall affect his right to use the firm name.

    Comments
    Where a partner after dissolution and before the affairs of partnership are wound-up, derives any profit 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 his share to the surviving partner or the representatives of the deceased partner. But if a partner carried on another business of a similar nature, this section would not apply.

    Illustration.-
    (1) A and B carry on business in partnership. The firm holds leasehold for the purposes of the business. A dies, Before the affairs of the firm are completely would up, the lease expires and B renews it. The renewed lease is partnership property. (Clements V Hall (1857) 2 De G & J. 173 = 119 R.R. 74 = 44 E.R. 954.
    (2) A, B and C are partners. A agrees to take lease in his own name, but in fact for partnership purposes, and dies before the lease is executed. The representatives of A can not deal with the lease without the consent of B and C:- (Alder V Fouracre (1919) 3 Swanst. 489 = 19 R.R. 256 = 36 E.R. 947).

    51. 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.

    Comments
    Illustration.-
    (1) A and B entered into partnership as solicitors for a term of seven years, A paying a premium of Pound 8001- to B, who, before entering into the partnership, knew that A was inexperienced and incompetent. After the expiration of two years, B complained that A's incompetence was injurious to the business, and called upon him to dissolve the partnership. A= thereupon files a suit praying for a dissolution and for a return of a proportionate part of the premium. A is entitled to the return of a part of premium proportionate to the un-expired portion of the term: (Atwood V Mande (1868) 3 ch. 369).

    (2) A and B become partner for ten years. A paying B a premium of pound 1000. A quarrel occurs at !he end of the eight years, both parties being in wrong, and a dissolution is decreed. A is entitled to a return of pound 200 of the premium from B. (Peas V Hewitt (1862) 31 beav. 22).

    52. Rights where partnership contract is rescinded for fraud or misrepresentation:
    Where a contract creating partnership is rescinded on the ground of the fraud or misrepresentation of any of the parties thereto, the party entitled to rescind is, without prejudice to any other right, entitled -

    (a) to a lien on, or a right of retention of, the surplus or 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 be indemnified by the partner or partners guilty of the fraud or misrepresentation against all the debts of the firm.

    Comments
    Partnership Contracts. A partnership contract is one which requires the utmost good faith and this duty extends to parsons negotiating for a partnership, but between whom no partnership as yet exist.

    Where a partner has been induced to enter into a partnership by reason of fraud or mis-representation, such a contract is voidable at his option under Sec. 19 of the contract Act Rescission of a contract will not be refused even though the firm has been adjudged insolvent [(Adam V Newbigging, 13 A C 308 (322)].

    53. Right to restrain from use of firm name or firm property:
    Alter 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 bought the goodwill of the firm, nothing in this section shall affect his right to use the firm name.

    Comments
    Restraining use of firm name. Under This Section, The Prohibition is to the carrying on of a similar business in the firm name and not to the carrying on of a similar business by a partner in his own name. (AIR 1955 Mad 442).

    54. 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 Contract Act, 1872, such agreement shall be valid if the restrictions imposed are reasonable.

    Comments
    Reasonable restrictions.- Whether the restrictions are reasonable will depend upon the facts of each case. The restrictions should afford a fair protection to the interest of the party concerned and not be so large as to interfer with the interest of the public.

    Restrictions may be with-regard to lime and place. The degree of protection may vary in different cases depending upon the character and nature of business concerned.

    A firm consisting of two partners was the selling agent of a mill. It is agreed that on the termination of the partnership neither partner is to take up the agency of the mill. Such a clause is in restraint of trade and the restriction un-exforceable. (Dera Shana v Laxminarian-a R. (1956).

    55. 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 Contract Act, 1872, IX of 1872 such agreement shall be valid if the restrictions imposed are reasonable.

    Comments
    This section lays down certain rules for settling accounts so far as the good will of the firm is concerned.

    What is "Good will". Good will" is the benefit arising from a firm a firms business connection. It is defined by lord Eldon in Cruttwell V Lye, (1810 17 Ves 335) as "the probability that old customers will resort to the old place". But this definition is not complete. What "goodwill" means must depend on the character and nature of business to which it is attached. Goodwill is a commercial term signifying the value of business in the hands of a successor. It is something more than the mere chance or probability of old customers maintaining their connection, though this is material. It may be summed up as "Whole advantage, whatever it may be of the reputation and connection of the firm, which may have been built up by years of honest work or gained by lavish expenditure of many". Very often, it is the very life and sap of a business. In valuing the goodwill, the court should set such a value upon it as is existing on the day of the dissolution.

    It has rightly been said that "Goodwill" is "a thing very easy to describe, but very difficult to define". The term "goodwill" is not defined in the Act. It may be described as the advantage which is acquired by a business, beyond the mere value of the capital, stock, fund or property employed therein, in consequence of the general public patronage and encouragement which it receives from constant or habitual customers.

    According to the Bombay High Court, the goodwill of a business is an intangible asset, being the whole advantage of the reputation and connections formed with the customers, together with the circumstances which make the connection durable. It is that component of the total value of that undertaking which is attributable to the ability of the concern to earn profit over course of years because of its reputation in location and other features.

    What goodwill means must depend on the character and nature of the business to which it is attached it is composed of a variety of elements and is bound to differ in its composition in different trades and in different business in the same trade. One element may preponderate in one business and another in another business.

    Goodwill may be personal or local. "Personal goodwill" is the advantage of the recommendation of the owner of a business and of the use of his name; "Local Goodwill" is merely the advantage which is attached to the premises and must be taken into account in calculating the value of such premises.

    In C.I.T.V. BC Srinivasa Setty (1981) 128 ITR 294), the Supreme Court of India held that no business Commenced for the first time possesses any goodwill from the start. Goodwill is generated as the business is carried on and may be augmented by the passage of time. Explaining the term goodwill, the court observed as follows.

    "Goodwill denotes the benefits arising from connection and reputation. A variety of elements goes into its making, and its composition varies in different trades and in different business in the same trade and while one element may preponderate in one business, another may dominate in another business. Its value may fluctuate from one moment to another, depending on changes in the reputation of the business. It is affected by every thing related to the business, the personality and business rectitude of the owners, the nature and character of the business, its name and reputation, its location, its impact on. the contemporary market, the prevailing socio-economic ecology, introduction to old customers and agreed absence of competition".

    The goodwill of the business of a firm forms part of the property of the firm (Vide Section, 14) and therefore, section-55 lays down that subject to contract between the partners, in settling the accounts of a firm after dissolution, the goodwill is to be included in the assets of the firm, and it may be sold, either separately or along with other property of the firm.

    Rights of the buyer of Goodwill. The purchaser of the goodwill of a partnership business has the following three rights.
    1. He can use the firm name.
    2. He can claim the benefit of any covenant by a partner not to carry on any competing business.
    3. He can trade as his vendor's successor.


  9. #8
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

  10. #9
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    Re: The partnership act, 1932


    CHAPTER - VII
    Registration Of Firms

    56. Power to exempt from application of this Chapter:
    The
    Provincial Government of any Province may, by notification in the official Gazette, direct that the provisions of this Chapter shall not apply to that Province or to any part thereof specified in the notification.

    Comments
    A.B. & Co., is a newly constituted firm and commences business without registering their firm, X is their creditor, X may sue A.B & Co., but, A, B & Co., or the partners thereof cannot sue Y, who is their debtor, unless before instituting the suit they effect registration of their firm under the Act. Even in the suit by X against A. B & CO., the latter can not claim a set off against X, unless the firm is registered under the Act.

    If however, the partners in A.B. & Co., wish to dissolve the partnership, they may file a suit for dissolution although the firm is not registered or they may file a suit against the debtors of the firm after dissolution. But one of the partners may not file a suit against the other partners e.g. for contribution of moneys borrowed by him under an express agreement for the purposes of the partnership, unless the firm is registered.

    Where the firm is registered, the statements required by, and made under Sec. 58 will be conclusive evidence against each of the partners under Sec. 68.

    57. Appointment of Registrars:
    (1) The
    Provincial Government may appoint Registrars of Firms for the purposes of this Act, and may define the areas within which they shall exercise their powers and perform their duties.

    (2) Every Registrar shall be deemed to be a public servant within the meaning of section 21 of the Pakistan Penal Code.

    Comments
    This Section provides that the Provincial Government may appoint Registrars of firms for the purpose of this Act, and may define the area within which they must exercise their powers and perform their duties. Every Registrar is deemed to be a public servant within the meaning of Section-21 of the Pakistan Penal.

    58. Application for registration:
    (1) The registration of a firm may be effected at any time 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, stating -

    (a) the firm name,
    (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)
    (f) the duration of the firm.

    The statement shall be signed by all the partners, or by their agents specially authorised in this behalf.

    (2) Each person signing the statement shall also verify it in the manner prescribed.

    (3) A firm name shall not contain any of the following words, namely:-
    "Government", "Jinnah", "Quaid-i-Azam" or words expressing or implying the sanction, approval or patronage of the Federal Government or any Provincial Government or the Quaid-i-Azam, except when the Provincial Government signifies its consent to these of such words as part of the firm name by order in writing.

    (3A) A firm name shall not contain the name of the "United Nations" or its abbreviations through the use of its initial letters or of any subsidiary body set up by that body unless it has obtained the previous authorisation of the Secretary-General of the United Nations in writing.

    (3B) A firm name shall not contain the name of the "World Health Organisation" or its abbreviations through the use of its initial letters unless it has obtained the previous authorisation of the Director-General in writing.

    (3c) A firm name shall not contain any word which may be declared by the Provincial Government, by notification in the official Gazette, to be undesirable:

    Provided that a firm which has as pad of its name any word declared by the Provincial Government to be undesirable shall, within one month of such declaration, alter its name and send a statement to this effect to the Registrar.]

    Comments
    The application for registration must be made to a Registrar appointed under Section-57.
    The registration of a firm may be effected at any time 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, stating:-

    (a) the firm name.
    (b) the place or principal place of business of the firm.
    (c) the names of any other places where the firm
    (e) the names in full and permanent addresses of the partners, and
    (f) the duration of the firm.

    Such a statement is to be signed by all the partners or by their agents specially authorised in this behalf. Each person signing the statement must also verify it in the prescribed manner. When the Registrar is satisfied that the provisions of section-58 have been duly complied with, he will entertain the statement for its Registration.

    59. Registration:
    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.

    Comments
    Registration raising presumption.- The partnership was registered with the Registrar of Firms. It was difficult to see how the appellants could possibly contend that firm had never existed. But assuming that they could advance this submission, it was obvious that it could be established only by very cogent evidence.- (Muhammad Ishaque V Erose Theatre PLD-1973 Kar. 522).

    60. Recording of alterations in firm name and principal place of business:
    (1) When an alteration is made in the firm name or in the location of the principal place of business of a registered firm, a statement may be sent to the Registrar 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 along with the statement relating to the firm filed under section 59.

    61. 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 may send intimation thereof to the Registrar, who shall make a note of such intimation in the entry relating to the firm in the Register of Firms, and shall file the intimation along with the statement relating to the firm filed under section 59.

    62. Noting of change in name and addresses of partners:
    When any partner in a registered firm alters his name or permanent address, an intimation of the alteration may be sent by any partner or agent of the firm to the Registrar, who shall deal with it in the manner provided in section 61.

    63. Recording of changes in and dissolution of a firm:
    (1) When a change occurs in the constitution of a registered firm any incoming, continuing or outgoing partner, and when a registered firm is dissolved any person who was a partner immediately before the dissolution, or the agent of any such partner or person specially authorised in this behalf, may give notice to the Registrar of such change or dissolution, specifying the date thereof; and the Registrar shall make a record of the notice in the entry relating to the firm in the Register of Firms, and shall file the notice along with the statement relating to the firm filed under section 59.

    (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, may 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).

    Comments
    S.63- Reconstitution of old firm - no new partnership.- Assessee firm comprising two partners originally registered under partnership deed and granted registration from year to year. Subsequently, a third partner taken in and a new partnership executed. Shares of new partners in new set up reshuffled. Not a new partnership, but only a reconstitution of same old firm not hit by S.26-A (5) of Income Tax Act (XI of 1922) and firm as reconstituted entitled to renewal of registration or re-registration.- (Commissioner of Income Tax, Rawalpindi V Ahmed Shafi and Brothus:- 1981 PLD 62).

    Form of Notice.- There is no prescribed form of Notice under this Section. What is important is that the Registrar should be informed that a change has taken place in the constitution of the firm. A partnership firm consisting of A, B and C was dissolved by agreement with a view to have a division of the business of the firm conducted at two places between them A and B take the business at one place and carried the business in the same name, and C took the business at another place. Copy of this agreement was sent to the Registrar of firm under section-63 with an intimation that C had ceased to be a partner of the firm. It was held that this was sufficient compliance with Section-63 of the Act. AIR 1956 Punj-24 = ILR 1957 Punj 27 (DB).

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

    Comments
    By Virtue of Section-64 the Registrar is empowered to rectify any mistake in the Register of firms bringing it in conformity with the documents of the firm. Beside that the signatories of any document relating to the firm, may also move an application to the Registrar for rectifying any mistake in such document.

    65. 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.

    66. Inspection of Register and filed documents:
    (1) The Register 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.

    67. 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.

    68. Rules of evidence:
    (1) Any statement, intimation or notice recorded or noted in the 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.

    Comments
    Object of the section. The object of this section is to compel members of a firm to have all subsequent changes in the constitution of a Registered firm notified to or "registered" with the Registrar of firms. This is carried out by providing that any statement intimation or notice recorded in the Register shall be conclusive proof of the facts stated therein, as against any person by whom or on whose behalf the same was signed in other words, he will not be able to set up a state of affairs different from that which he has caused to be stated in the Register. But a third party whose name is not in Register can prove that a particular person (whose name is not in Register can prove that a particular person (whose name is not recorded in the Register of Firms) is a partner nonetheless. The importance, or rather the compelling force of the section may be shown by the following example.
    Illustration.-

    A, B and C are partners in a registered firm. A retires. It will be as necessary for A as for B and C to give public notice of his retirement which under Sec. 72 of this Act, includes notice to the Registrar. If this is not done, A will be as much liable for the acts of the continuing partners or of the firm as if A had continued to be a member of the firm. And on the other hand the firm will be liable for any act purporting to be done by A on behalf of the firm after retirement.-Sec Section-32 (3).
    Oral Evidence.- Oral evidence of Registration of a firm is not admissible. PLD - 1960 Kar. 736 AIR-1955 A vind. Prod-44.

    69. 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 behalf of any person 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.

    (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.

    (3) The provisions of sub-sections (1) and (2) shall apply also to a claim of set-off or other proceeding to enforce a right arising from a contract, but shall not affect-

    (a) the enforcement of any right to sue for the dissolution of a firm or for accounts of a dissolved firm, or any right or power to release the property of a dissolved firm, or

    (b) the powers of an official assignee, receiver or Court under the
    insolvencyFederal Territory of Karachi 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 to partners in firms which have no place of business in
    Pakistan, or whose places of business in Pakistan are situated in areas to which, by notification under section 56, this Chapter does not apply, or

    (b) IX of 1887: to any suit or claim of set-off not exceeding one hundred rupees in value which,
    *** 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.

    Comments
    S. 69 is one of the most important sections in the Act, It is because of this section that it would be in the interests of the partners to get the firms registered although, under the Act such registration is not compulsory.

    It will be seen from the above given provisions of this section, that it lays down four rules, the analysis of which are given as follows-

    Rule.-I (S.69(1)- on analyzing Rule- 1 one finds that it bars the right of any parsons suing as a partner in the firm to enforce a fight arising from a contract or conferred by the Partnership Act against either-

    (1) the firm or
    (2) any present or past member of 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.

    This Rule laid down in s.69(1) is confined to the effect of non-registration of a firm in case of legal proceeding between the partners inter se. A partner (or a person claiming to be or to have been a partner) cannot bring a suit to enforce a right arising from a contract or conferred by this Act, against the firm or against his co-partner, unless the firm is registered and the name of the partner suing appears in the Register of Firms as a partner in the firm.

    The difficulty caused by this rule may be got over by getting registration of the firm effected at any time before the suit is filed. Registration of the firm however, can be affected only if the statement required to be furnished to the Registrar of Firms is signed by all the partners or their specially authorised agents and duly verified (S.58), and when disputes have arisen between partners, it is not likely that they would all join in doing so. The only remedy of the partner or partners desiring to bring a suit in such a case will be to ask for dissolution of the firm and accounts or for accounts, if the firm is already dissolved.

    An interesting point has been raised in some cases under this section. Is registration of a firm a condition precedent to the filing of a suit? In other words, must such registration necessarily take place before the suit is filed, on the ground that such registration would operate retrospectively? some decisions (mainly from the Indian High Courts of Nagpur and Calcutta) have held that a suit by an un-registered firm can be validated by subsequent registration. However, several other High Courts (including the High Courts of Bombay, Madra Patna and Lahore) have held that such subsequent registration cannot cure a defect which existed when the suit was instituted. These decisions have taken the view that such a suit is non est. i.e. non existent in the eyes of law, and should therefore be dismissed at the threshold. It is of Course, open to the firm to withdraw the suit, get itself registered and then file a fresh suit. Needless to mention, the fresh suit should not be time barred.

    It is submitted that the latter view namely that subsequent registration does not cure the technical defect) is more sound and now also finds support in the decision of Supreme Court of India in C.I.T AP V Jaya Lakshmi Rice and oil Mills-(AIR 1971 Sc. 1015).

    Rule-II (S. 69(2).- S.69(2) deals with enforcing claims by the firm against third parties, and prohibits the enforcing in a suit of any right arising from a contract against a 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.

    One important point is to be noted in connection with this Rule. This section does not affect the right of a third party to proceed against the firm or its partners, even though un-registered nor does it affect the right of an official assignees to realize the property of an insolvent partner.

    It is also important to note that Act does not say that any transaction of an un-registered firm will be invalid; it merely says that a firm will not be allowed to take the assistance of a civil court, except upon the condition precedent that it is registered. Registration may be affected by a firm at any time, before filing a suit or taking other civil proceedings in a Court against third parties.

    Problems.- 1. A & B Co., as registered as a partnership firm in 1988, with A, B and C as partners. In 1989, A dies in 1990, B and C sue X in the name and on behalf of A & Co., with fresh registration, is the suit maintainable? What difference would it make, if in 1990 B and C had taken a new partner D, and Then filed a suit against X without fresh registration?

    Ans.- The suit is maintainable without fresh registration. If an additional partner D had come into the firm as a partner, and his name had not been entered in the register in accordance with notice of a change in the constitution of the firm given to the Registrar, the firm as then constituted could not sue because although it was a registered firm, D one of the persons suing, would not be shown in the Register of firms as a partner in the firm at the date of the suit. (Pratapchand V Jehangirji, 42 Bom. L.K. 487).

    2. A, B & Co., is a registered partnership firm started in 1985, with A and B as partners. In 1986 C & D were taken as additional partners of A B & Co., In 1987 A and B retired from the firm without dissolution, and the business was continued by C and D as before in the name of A B & Co. These changes in A B & Co, were not notified to the Registrar of Firm. In 1988 A. B & Co., filed a suit against P to recover from him As 500/- due by P to the old firm of A, B & Co. P wants to resist the claim and contends that he does not owe any money to the plaintiff from A, B & Co. as constituted at the time of the suit. State what advice you will give to P for his defense give reasons for your answer.

    Ans.- The firm as now constituted cannot sue P, because though it is a registered firm C and D, the partners suing are not shown in the Register of Firms as partners in the firm at file date of the suit.

    Rule-III (S.69(3).- Under this rule, the disabilities mentioned in the preceding two Rules extend also to claim of Set-off and to other proceedings to enforce any right arising from a contract.
    Two important exceptions are however, made to the rules contained in those sub-sections. The first exception seems to have been made on equitable grounds, and the second on the ground of convenience. The first exception allows partners even in case of an un-registered firm, to enforce their right to sue for dissolution and accounts or to ask for accounts where the firm has already been dissolved. This sub-clause also makes it clear that it will not be necessary to have registration of a firm effected where a suit or any legal proceedings are instituted to realize the property of a dissolved firm, as for instance, a suit to recover a debt due to the firm.

    The second exception saves the powers of an official assignee, receiver or court to realize the property of an insolvent under the insolency Acts.

    Rule-IV (S.69(4)).- This Rule provides that the above Rules do not apply:-
    (a) to firms or to partners in firms which have no place of business in Pakistan, or whose places
    of business in Pakistan are situated in areas to which by notification under section 55, this chapter does not apply; or
    (b) to any suit or claim of set-off not exceeding Rs 100 in value, or to any proceeding in execution, or other proceeding incidental to, or arising from, any such suit or claim.

    Clause (a) above, exempts from the operation of s. 69 firms whose places of business are all outside Pakistan or in areas exempted from the operation of this Chapter under S. 55. Such firms can institute suit or other legal proceedings or plead set-offs without being registered in any court in Pakistan otherwise having jurisdiction to entertain the suit or other legal proceedings.

    Clause (b) above states a rule which is a half-hearted attempt on the part of the legislature to took at the matter of registration from the point of view of persons engaged in business on a very small scale. It exempts from the operation of this section suits and claims of set-off not exceeding the meager amount of one hundred rupees; in respect of matters other wise triable by the various small causes courts.

    Filing of suit by un-registered firm effect.- Partners of un- registered firm- held, could not file suit under a contract in their own name as such suit would be barred under S. 69 of the Act. (Overseas Containers Ltd., & another V Muhammad Iqbal & another. 1988 CLC 461.

    70. Penalty for furnishing false particulars:
    Any person who signs any statement, amending statement, notice or intimation under this Chapter containing any particular 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 be punishable with imprisonment which may extend to three months, or with fine, or with both.

    71. Power to make rules:
    (1) The Provincial Government may make rules prescribing the fees which shall accompany documents sent to the Registrar of Firms, or which shall be payable for the inspection of documents in the custody of the Registrar of Firms, or for copies from the Register of Firms:

    Provided that such fees shall not exceed the maximum fees specified in Schedule
    *[:]

    Provided further that the fees payable for any service desired on the same day on which an application for the same is made may be double the aforesaid maximum fees.

    (2) The
    provincial Government, may also make rules -
    (a) prescribing the form of statement submitted under section 58, and of the verification thereof;
    (b) requiring statements, intimations and notices under sections 60, 61, 62 and 63 to be in prescribed form, and prescribing 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 disputes arise;
    (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; and
    (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.

  11. #10
    Join Date
    Apr 2011
    Age
    32
    Posts
    152
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Rep Power
    3

    Re: The partnership act, 1932


    CHAPTER-VIII:Supplemental.

    CONTENTS OF THIS CHAPTER:



    CHAPTER - VIII
    Supplemental

    72. 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, 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.

    Comments
    Public Notice.- Sub-Sec. (a) prescribes the cases in which a public notice should be given in the manner stated therein. In case a retiring partner desiring to terminate further liability [Sec. 32(3)(4)], or an expelled partner desiring to terminate further liability [sec. 33(2)] or partners of a dissolved firm desiring to terminate further liability (sec. 45)-or a minor admitted to benefits of partnership electing to become or not to become partner [Sec. 30(5)], public notice should be given as stated in sub-sec. (a). Reading the provisions of the said section, the requirement of a public notice becomes necessary or mandatory. S. 72. Prescribes that public notice has to be given by intimation to Registrar of firms and by publication in official Gazette and at least in one vernacular newspaper circulating in the district, where the firm has its place of business. So, if there is mere publication of notice in one daily, it would not satisfy the requirements of S.72 of the Act. (C. Assiamma V State Bank of Mysore AIR 1990 Ker. 160).

    73. [Repeals.]
    Rep. by the Repealing Act, 1938 (I of 1938, S. 2 and Schedule.

    74. Nothing in this Act or any repeal effected 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
    Maximum Fees
    [See sub-sec. (1) of Sec. 71]

    Document or act in respect of which the fee is payable Maximum Fees
    1 2
    Rs.
    Statement under Section 58 50
    Statement under Section 60 20
    Intimation under Section 61 20
    Intimation under Section 62 20
    Notice under Section 63 20
    Application under Section 64 20
    Inspection of the Register of Firms under 5
    sub-section (1) of Section 66
    Inspection of documents relating to a firm 5
    under sub-section (2) of Section 66 or any
    other document in the custody of the
    Registrar of Firms
    Copies from the Register of Firms Rs. 2 for each 100 words or part thereof."
    APPENDIX I
    SPECIMEN FORM OF A PARTNERSHIP DEED

    THIS AGREEMENT made at Karachi this 1st date of July, 1990, between AB, Muslim, adult, residing at Karachi of the one part AND, CD, Muslim, adult, residing at Karachi, of the other part.
    WHEREAS the party of the One Part and the party of the Other Part have agreed to enter into a partnership business upon the terms and conditions herein contained;

    NOW THEREFORE THESE PRESENTS WITNESS.-And it is hereby agreed between the parties hereto as follows:
    1. This Deed of Partnership shall come into force with effect from the first day of April, 1990.

    2. The partnership business shall consist of sale, purchase and manufacture of dyes and chemicals, and all kinds of agency business, whether manufacturing or otherwise, and/or such other business as may be decided by the partners from time to time.

    3. The partnership shall be carried on in the name and style of "AB & Sons".

    4. The partnership shall be a partnership at will.

    5. The partnership business shall be conducted at Karachi and/or at such other place or places as shall be agreed to. by the partners from time to time.

    6. Both the partners shall initially invest Rs. 10,000 each and the amounts so invested by the partners shall form tile capital of the partnership, and the same shall be used as per these present in the partnership business.

    7. Further capital, if any, required by the partnership shall be obtained from time to time by the partnership by way of loans hundies or otherwise from third parties on payment of interest at the market rate, and such interest shall be paid out of the partnership funds irrespective of profits and losses of the said business.

    8. The net profits of the partnership business shall, after meeting all the necessary costs, charges and expenses incurred in carrying on the said partnership business, be divided in the following proportion:
    (a) AB..................50P. in the rupee.
    (b) CD..................50P. in the rupee.
    any they shall in the like proportion bear all losses, including loss of capital.

    9. The profits and losses of the partnership shall be determined as on the 30th day of June each year, and the same shall be distributed to, or recovered from, the partners concerned in the proportion aforesaid.

    10. It is hereby agreed that each of the partners shall be entitled to draw Rs. 1,000 (Rupees one thousand only) per month for his personal expenses without the consent of the other partner, and such drawing shall be debited to his personal account, and the sum so drawn shall be in part or full satisfaction, as the case may be, of the share of the said partner in the profits of the said partnership business for that year. PROVIDED ALWAYS that if in any year, the sum drawn as aforesaid by the partner shall exceed the amount of his share of the net profits for that year, the said partner shall refund the excess to the partnership as soon as the same shall be ascertained or from his share of the profits of the subsequent year or years.

    11. The partners shall open one or more current accounts with any Bank or Banks in the name of the partnership, and the account or accounts so opened shall be operated by either partner.

    12. Both the partners shall have full power and authority to draw cheques, withdraw cash through signed cheques, overdraw from Bank or Banks, take loans, secure credits, sign bills of exchange and any other legal instrument or instruments, endorse hundies, appoint attorney or attorneys for and to commence, continue, defend, compound or settle any suit, prosecution or any legal proceeding for or against the partnership, PROVIDED ALWAYS that in each such case, the approval or ratification of the other partner shall invariably be obtained.

    13. All partnership money, bills, notes, cheques and other securities received by the partnership shall, as and when received, be paid and deposited in the Bank or Banks to the credit of the firm's account, except such sums as are immediately required to meet the current expenses.

    14. The accounts of the said partnership shall be properly maintained and kept at the office of the partnership, and shall be made up and prepared at the close of each year ending on the 30th day of June and the Same shall be signed by both the partners.

    15. None of the partners hereto shall pledge the credit of the said business of the partnership, except in the usual and regular course of business, or give credit to or conduct any business for any other firm, company or person.

    16. The money constituting the net profits made on such yearly account as aforesaid, after deducting all the expenses, salaries, wages, taxes, etc., may be withdrawn by each partner respectively entitled thereto according to his respective share as herein before provided (less such sums as may have been previously drawn on account by such partner).

    17. In the event of any partner desiring to retire, for any reason whatsoever, from the said partnership, he shall give a previous notice of three months to that effect. On such notice being received by the firm, the account books of the firm shall be brought up-to-date and a balance-sheet as at the end of the period of the said notice shall be made up. The outgoing partner shall be paid his share of the net profits as on the date of retirement and shall be required to pay all his dues or debts, if any, to the firm, and after all the claims and dues of and/or against the firm are satisfied, he shall be deemed to be free from the partnership, and the other partners shall be deemed to be free from the partnership, and the other partners shall be entitled to continue the business of the partnership as the sole proprietor thereof. The partner thus going out shall be entitled to the rights of the goodwill of the firm to the extent of his share in the partnership.

    18. In the event of death of either of the partners occurring during the currency of the said partnership, the surviving partner shall be entitled to continue and carry on the said business in partnership with the legal heirs, successors or legal representative of the deceased partner, and if such heirs, successors or legal representatives of the deceased partner decide not to carry on the said business in partnership, then the surviving partner may carry on the said business as the sole proprietor thereof in the same name and style, after working out and paying the dues and claims of the deceased partner to his heirs, successors or legal representatives, as the case may be, who shall have full power to inspect accounts and obtain such information as may be necessary for ascertaining that the share of the deceased has been properly worked out and paid. The share of the deceased shall include his share in the goodwill of the firm.

    19. Any dispute or question which may arise in the business of the said partnership in connection with any matter between the partners or the surviving partner and the heirs, successors or legal representatives of the deceased partner, whether during the currency of this Agreement or after the termination thereof, relating to or arising out of the business of the partnership or of this Agreement. Such arbitration shall be held at Karachi, and shall be governed by the provisions of the Arbitration Act for the time being in force in Pakistan, and the Arbitration Award shall be binding on the parties to the dispute.
    IN WITNESS WHEREOF the parties hereto have hereunto set and subscribed their respective hands and seals the day and year first herein above written.

    SIGNED SEALED AND
    DELIVERED by the within named (Signature of AB)
    AB, in the presence of .________________
    SIGNED SEALED AND
    DELIVERED by the within named (Signature of CD)
    CD, in the presence of ___________________
    APPENDIX II
    SPECIMEN FORM OF A DISSOLUTION DEED

    THIS DEED made at Karachi this 1st day of March, 1990, between AB of Karachi, Muslim adult, residing at Karachi of the First Part and CD, Muslim adult, residing at Karachi of the other part.

    WHEREAS the party of the First Part and the party of the Other Part have entered into a Partnership business in dyes and chemicals under a Deed of Partnership dated the 1st day of January, 1988;
    AND WHEREAS the said Partnership was a partnership at will;

    AND WHEREAS on account of disputes between the partners, it has been decided by and between the partners that the said partnership shall be dissolved on the terms and conditions hereinafter appearing:

    NOW THIS DEED WITNESS as follows:
    1. The said partnership entered into under the Deed of Partnership dated the 1st day of January, 1988 is hereby dissolved with effect from the date of this Deed.

    2. The party of the First Party hereby agrees and undertakes to notify the dissolution of the partnership to the Registrar of Firms and also give notice thereof in a local newspaper, within 21 days from the date of the execution hereof.

    3. The assets and liabilities of the partnership, have been assessed and the final balance-sheet and profit and loss account have been taken to the mutual satisfaction of both the parties hereto.

    4. On the dissolution of the partnership, the assets and liabilities of the firm as per the balance-sheet aforesaid together with the stocks, securities goodwill, tenancy rights and all other assets of the firm have been allotted and assigned to the party of the First Part, who has paid to the party of the Other Part a sum of Rs....... (Rupees........ only, the receipt whereof the party of the Other part hereby acknowledges) in part-payment of his share in the net divisible assets of the firm and has given to the party of the Other Part a Promissory Note for a sum of Rs....... (Rupees ....... only) payable on 1st December 1990 with interest at 10 per cent annum being the balance of his share in the assets of the firm.

    5. The party of the Other part hereby releases, grants, assigns and conveys ALL his share, right, title and interest in the said partnership business and properties, including the goodwill and tenancy rights thereof TO HOLD the same into the party of the First Part absolutely.

    6. The party of the First Part hereby convenants with the party of the Other Part that he shall discharge all the liabilities and obligation of the partnership and shall effectively indemnify and continue to indemnify the party of the Other Part against claims and expenses in respect thereof.

    7. The party of the Other Part shall not, for a period of 5 years from the date hereof, engage himself directly or indirectly in the business of dyes and chemicals within a radius of 2 miles from the premises of the partnership shop.

    8. Unless repugnant to the context or meaning thereof, the expressions "the party of the First Part" and "the party of the Other Part" shall include their respective heirs, representatives, successors and assigns.

    IN WITNESS WHEREOF the parties hereto have hereunto set and subscribed their respective hands and seals the day and year first herein above written.

    SIGNED SEALED ANDDELIVERED by the within named (Signature of AB)
    AB in the presence of:
    SIGNED SEALED ANDDELIVERED by the within named (Signature of CD)
    CD in the presence of:
    APPENDIX III
    THE CONTRACT ACT
    (IX OF 1872)
    CHAPTER Xl
    (Ss. 239- 266)
    OF PARTNERSHIP

    239. "Partnership defined": "Partnership" is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business, and to share the profits thereof between them.
    "Firms defined": Persons who have entered into partnership with one another are called collectively a "firm".

    Illustrations.
    (a) A and B buy 100 bales of cotton, which they agree to sell for their joint account; A and B are partners in respect of such cotton.
    (b) A and B buy 100 bales of cotton, agreeing to share it between them. A and H are not partners.
    (c) A agrees with B, a goldsmith, to buy and furnish gold to B, to be worked up by him and sold, and that they shall share in the resulting profit or loss. A and B are partners.
    (d) A and B agree to work together as carpenters, but that A shall receive all profits and shall pay wages to B. A and B are not partners.
    (e) A and B are joint owners of a ship. This circumstances does not make them partners.

    240. Lender not a partner by advancing money for share of profit: A loan to a person engaged or about to engage in any trade or undertaking upon a contract with such person that the lender shall receive interest at a rate varying with the profits or that he shall receive a share of the profits, does not, of itself, constitute the lender a partner, or render him responsible as such.

    241. Property left in business by retiring partner, or deceased partner's representative: In the absence of any contract to the contrary, property left by a retiring partner, or the representative of a deceased partner, to be used in the business is to be considered a loan within the meaning of the last preceding section.

    242. Servant or agent remunerated by share of profits not a partner: No contract for the remuneration of a servant or agent of any person, engaged in any trade or undertaking, by a share of the profits of such trade or undertaking shall, or itself, render such servant or agent responsible as a partner therein, nor give him the rights of a partner.

    243. Widow or child of deceased partner receiving annuity out of profits not a partner: No person, being a widow or child of a deceased partner of a trader and receiving by way of annuity a proportion of the profits made by such trader in his business, shall, by reason only of such receipt, be deemed to be partner of such trader, or be subject to any liabilities incurred by him.

    244. Person receiving portion of profits for sale of goodwill not a partner: No person receiving, by way of annuity or otherwise, a portion of the profits of any business, in consideration of the sale by him of the goodwill of such business, shall by reason only of such receipt, be deemed to be a partner of the person carrying on such business, or be subject to his liabilities.

    245. Responsibility of person leading another to believe him a partner: A person who has, by words spoken or written or by his conduct, led another to believe that he is a partner in a particular firm is responsible to him as partner in such firm.

    246. Liability of person permitting himself to be represented as a partner: Any one consenting to allow himself to be represented as a partner is liable, as such, to third persons who, on the faith thereof, give credit to the partnership.

    247. Minor partner not personally liable but his share is: A person who is under the age of majority according to the law to which he is subject may be admitted to the benefits of the partnership, but cannot be made personally liable for any obligation of the firm; but the share of such minor in the property of the firm is liable for the obligations of the firm.

    248. Liability of minor partner on attaining majority: A person who has been admitted to the benefits of partnership under the age of majority becomes, on attaining that age, liable for all obligations incurred by the partnership since he was so admitted, unless he gives public notice within a reasonable time, of his repudiation of the partnership.

    249. Partner's liability for debts of partnership: Every partner is liable for all debts and obligations incurred while he is a partner in the usual course of business by or on behalf of the partnership; but a person who is admitted as a partner into an existing firm does not thereby become liable to the creditors of such firm for anything done before he became a partner.

    250. Partner's liability to third person for neglect or fraud of co-partner: Every partner is liable to make compensation to third persons in respect of loss or damage arising from the neglect or fraud of any partner in the management of the business of the firm.

    251. Partner's power to bind co-partners: Each partner who does any act necessary for, or usually done in, carrying on the business of
    such a partnership as that of which he is a member binds his co-partners to the same extent as if he were their agent duly appointed for that purpose.

    Exception: If it has been agreed between the partners that any restriction shall be placed upon the power of any one of them, no act done in contravention of such agreement shall bind the firm with respect to persons having notice of such agreement.

    Illustrations
    (a) A and B trade in partnership, A residing in England, and B in Pakistan. A draws a bill of exchange in the name of the firm. B has no notice of the bill, nor, is he at all interested in the transaction. The firm is liable on the bill, provided the holder did not know of the circumstances under which the bill was drawn.

    (b) A, being one of a firm of solicitors and attorneys, draws a bill of exchange in the name of the firm without authority. The other partners are not liable on the bill.

    (c) A and B carry on business in partnership as bankers. A sum of money is received by A on behalf of the firm. A does not inform B of
    such receipt, and afterwards A appropriates the money to his own use. The partnership is liable to make good the money.

    (d) A and B are partners. A with the intention of cheating B, goes to a shop and purchases articles on behalf of the firm, such as might be used in the ordinary course of the partnership business and converts them to his own separate use, there being no collusion between him and the seller. The firm is liable for the price of the goods.

    252. Annulment of contract defining partners, rights and obligations: Where partners have by contract regulated and defined, as between themselves, their rights and obligations, such contract can be annulled or altered only by consent of all of them, which consent must either be expressed, or be implied from a uniform course of dealing.

    Illustrations
    A, B and C, intending to enter into partnership, execute written articles of agreement, by which it is stipulated that the net profits arising from the partnership business shall be equally divided between them. Afterwards they carry on the partnership business for many years. A receiving one-half of the net profits and the other half being divided equally between B and C. All parties know of and acquiesce in this arrangement. This course of dealing supersedes the provision in the articles as to the division of profits.

    253. Rule determining partners' mutual relations, where no contract to contrary: In the absence of any contract to the contrary the relations of partners to each other are determined by the following rules:-
    (1) all partners are joint owners of all property originally brought into the partnership stock, or bought with money belonging to the partnership, or acquired for the purposes of the partnership business. All such property is called partnership property. The share of each partner in the partnership property is the value of his original contribution, increased or diminished by his share of profits or loss;

    (2) all partners are entitled to share equally in the profits of the partnership business, and must contribute equally towards the losses sustained by the partnership;

    (3) each partner has a right to take part in the management of the partnership business;

    (4) each partner is bound to attend diligently to the business of the partnership, and is not entitled to any remuneration for acting in such business;

    (5) when differences arise as to ordinary matters connected with the partnership business, the decision shall be according to the opinion of the majority of the partners; but no change in the nature of the business of the partnership can be made, except with the consent of all the partners;

    (6) no person can introduce a new partner into a firm without the consent of all the partners;

    (7) if from any cause whatsoever any member of a partnership ceases to be so, the partnership is dissolved as between all the other members;

    (8) unless the partnership has been entered into for a fixed term, any partner may retire from it at any time;

    (9) where a partnership has been entered into for a fixed term, no partner can, during such term, retire except with the consent of all the partners, nor can he be expelled by his partners for any cause whatever, except by order of Court;

    (10) partnerships, whether entered into for a fixed term or not, are dissolved by the death of any partner.

    254. When Court may dissolve partnership: At the suit of a partner the Court may dissolve the partnership in the following cases:-
    (1) when a partner becomes of unsound mind;
    (2) when a partner, other than the partner suing, has been adjudicated an insolvent under any law relating to insolvent debtors;
    (3) when a partner, other than the partner suing, has done any act by which the whole interest of such partner is legally transferred to a third person;
    (4) when any partner becomes incapable of performing his part of the partnership contract;
    (5) when a partner, other than the partner suing, is guilty of gross misconduct in the affairs of the partnership or towards his partners;
    (6) when the business of the partnership can only be carried on at a loss.

    255. Dissolution of partnership by prohibition of business: A partnership is in all cases dissolved by its business being prohibited by law.

    256. Rights and Obligations of partners in partnership continued after expiry of term for which it was entered into: If a partnership entered into for a fixed term be continued after such term has expired, the rights and obligations of the partners will, in the absence of any agreement to the contrary, remain the same as they were at the expiration of the term, so far as such rights and obligations can be applied to a partnership dissolvable at the will of any partner.

    257. General duties of partners: Partners are bound to carry on the business of the partnership for the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the partnership to any partner or his legal representatives.

    258. Account to firm of benefit derived from transaction affecting partnership: A partner must account to the firm for any benefit derived from a transaction affecting the partnership.

    Illustrations
    (a) A, B and C are partners in trade. C, without the knowledge of A and B, obtains for his own sole benefit a lease of the house in which the partnership business is carried on. A and B are entitled to participate if they please, in the benefit of the lease.
    (b) A, B and C carrying on business together in partnership as merchants trading between Bombay and London D, a merchant in London, to whom they make their consignments, secretly allows C a share of the commission which he receives upon such consignments, in consideration of C's using his influence to obtain the consignments for him. C is liable to account to the firm for the money so received by him.

    259. Obligations, to firm, of partner carrying on competing business: If a partner, without the knowledge and consent of the other partners carries on any business competing or interfering with that of the firm, he must account to the firm for all profits made in such business, and must make compensation to the firm for any loss occasioned thereby.

    260. Revocation of continuing guarantee by change in firm: A continuing guarantee, given either to a firm or to a third person, in respect of the transactions of a firm, is, in the absence of agreement to the contrary, revoked as to future transactions by any change in the constitution of the firm to which, or in respect of the transactions of which, such guarantee was given.

    261. Non-liability of deceased partner's estate for subsequent obligation: The estate of a partner who has died is not, in the absence of an express agreement, liable in respect of any obligation incurred by the firm after his death.

    262. Payment of partnership debts and of separate debts: Where there are joint debts due from the partnership, and also separate debts due from any partner, the partnership property must 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 must be applied in payment of his separate debts or paid to him. The separate property debts, and the surplus (if any) in the payment of the debts of the firm.

    263. Continuance of partners' rights and obligations after dissolution: After a dissolution of partnership, the rights and obligations of the partners continue in all things necessary for winding up the business of the partnership.

    264. Notice of dissolution: Persons dealing with a firm will not be affected by a dissolution of which no public notice has been given, unless they themselves had notice of such dissolution.

    265. Winding up by Court on dissolution or after termination: Where a partner is entitled to claim a dissolution of partnership, or where a partnership has terminated, the Court may, in the absence of any contract to the contrary, wind up the business of the partnership, provide for the payment of its debts and distribute the surplus according to the shares of the partners respectively.

    266. Limited liability partnerships, incorporated partnerships and joint-stock companies: Extraordinary partnerships, such as partnerships with limited liability, incorporated partnerships and joint stock companies, shall be regulated by the law for the time being in force relating thereto.


Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Visitors found this page by searching for:

partnership act 1932

Dawood sahib V sheikh Mohideen 1937

form v of partnership act 1932 pakistan punjab

Discuss the importance of “utmost good faith in maintaining relationship between partner by referring to partnership act 1961 and decided cases.

the constitution automatically changes to proprietory concern if a partner dies as per partnership act 1932

examples of partnership act pakistan

smith v anderson 1818 under partnership act

ahmed raz partnership firm in pakistan

partnership act 1932 main points which is mostly applicable

praepositus negotils societatis means

essel v hayward 1860

powered by vBulletin free partnership contracts

pakistan partnership act 1932 presentation

partnership act 1932 pakistan faqs

Bentley v Craven partnership acts 1908

partner shall be able to bind the partnership by act or contract to any liability exceeding 5 000.00 without the prior written consent of each partner - what is this for

SPECIAL FEATURES OF partnership act 1932

nature of partnership act pld

Eastend Agencies v Mafizuddin

mcqs partnership act 1932

sample registration form needed of partnership act 1932 pakistan

Practical Problems In the Partnership Act 1932

Practical questions in Partnership Act 1932 - (Indian)

DOES THE RIGHT TO INSPECT ACCOUNTS ATTRACTS SEC 44 (D) OF PARTNERSHIP ACT

power of arbitrator to disolve the partnership firm under sec 44 (d)

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •