THE INDIAN PARTNERSHIP ACT WITH RESPECT TO RELATION OF PARTNERS TO THIRD PARTNER

Updated: Aug 16

1.Section 18 of Indian Partnership Act, 1932- Partner to be agent of the firm;

A partner is the agent of the firm for the purpose of the business of the firm.


2. Section 19 of Indian Partnership Act, 1932 – Implied Authority of partner as agent of the firm

(i) Subject to provision of Sec 22, the act of a partner which is done to carry on, in 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.

(ii) In absence of any usage or custom of trade to the contract the implied authority of a partner does not empower him to-

(a) Submitting a dispute relating to the business of the firm to arbitration.

(b) Open a banking account on behalf of the firm in his own name.

(c) Compromise or relinquish any claim or portion of a claim by the firm.

(d) Withdraw a suit or proceeding filed on behalf of the firm.

(e) Admit any liability in a suit or proceeding against the firm

(f) Acquire immovable property on behalf of the firm.

(g) Transfer immovable property belonging to the firm

(h) Enter into partnership on behalf of the firm.


3. Section 20 of Indian Partnership Act, 1932 – Extension and restriction of partner’s implied authority.

Partners in firm may by contract between them extend or restrict 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.


4. Section 21 of Indian Partnership Act, 1932 – Partner’s authority in an emergency

A partner has authority to act for the purpose of protecting firm from loss as would be done by a person in his own case under similar circumstances and such act binds the firm.


5. Section 22 of Indian Partnership Act, 1932 – Mode of doing Act to bind firm

In order to imply that the act executed by a partner on behalf of the firm, it should be executed in the firm’s name or in any manner which implies that is done by firm.


6. Section 23 of Indian Partnership Act, 1932 - Effect of admission by partner

An admission on 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.


7. Section 24 of Indian Partnership Act, 1932 – Effect of notice to acting partner

When notice is given to a particular partner who is acting in business of the firm of any matter relating to the affairs of the firm, it is assumed that the notice is received by the whole firm and all partners are aware of it.


8. Section 25 of Indian Partnership Act, 1932 – Liability of a partner for acts of the firm

Every partner is liable jointly and as well as severally for all acts of the firm done whole he is a partner.


9. Section 26 of Indian Partnership Act, 1932 - Liability of the firm for wrongful acts of a partner

Where by the wrongful act or omission of a partner acting in ordinary course of business of a firm, a partner causes lose or injury to any third party, then the firm will be liable to pay the penalty as much as the partner would be liable.


10. Section 27 of Indian Partnership Act, 1932 – Liability of the firm for misapplication by partners

a) Partner acting within authority receives money or property from 3rd party and he misuses it for his personal use.

b) A firm in course of business receives money or property from 3rd party and any of the partner misutilizes it so the firm will be liable to pay for the losses.


11. Section 28 of Indian Partnership Act, 1932 – Holding Out

(i) It means partner by estopel. Anyone who by words spoken or written or by conduct represents himself, or knowingly permits himself to be represented, to a partner in a firm, is liable as a partner in firm to anyone who has faith of his 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.

E.g. Suppose your brother wants to start business with A, B, C they go to bank to get some loan but they are denied. Your brother approaches you for help. Then ‘you’ go to bank and say that please give the loan all the money would be repaid back on time. ‘You’ are not a partner in the firm but as ‘you’ have represented the firm in the bank ‘you’ become “partner by Estoppel” and if they can’t pay back the amount ‘you’ would also be liable to pay back for only that transaction.

(ii) When a firm continues to use a deceased partner’s name then the firm can’t put that the deceased person is liable even after his death.


12. Section 29 of Indian Partnership Act, 1932 – Right of a partner’s interest

(i)Suppose A,B,C are partners , A has taken loan from D and is unable to pay it so says ‘D’ to take 25% of his profit so in that case ‘D’ won’t be said as a partner, ‘D’ won’t have the right to see the accounts or inspect, the books of the firm. He will only get as promised to him.

(ii) If the firm gets dissolved or transferring partner ceases to become a partner then transferee would get his share of profit from remaining partners.


13. Section 30 of Indian Partnership Act, 1932 – Minor admitted to the benefits of the firm.

(1) A minor admitted in the firm with consent of all the partners may be admitted to all the benefits of partnership. He does not become a partner.

(2) Minor has right to share property, profits of firm and right to access and inspect& copy of any accounts of firm.

(3) Minor shall be liable for acts of firm but he won’t be liable for acts of firm but he won’t be personally liable for any such act.

(4) Minor can’t sue partners for an account or payment of his share of profit or property, his amount of share shall be determined by valuation as per Section 48 of this act.

(5) When minor has attained ‘majority within 6 months of it the person has to give a public notice that he has elected to become or not become a partner of the firm, such notice shall determine his position in the firm, if he fails to give notice then he becomes partner after expiry of 6 months.

(6) When a person has been admitted as a minor to benefits of the firm, the burden of proving the fact that such person had no knowledge of such admission until a particular date after the expiry of 6 months of his attaining of majority shall lie on person asserting the facts.

(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 3rd person for all acts of the firm, done since admitted to benefits of partnership.

b) his share in the property and profits of firm shall be the share which he was entitled as a minor.

(8) When such partner elects not to become a partner;

a) His rights and liabilities continues to be those of the minor under this section up to date on which he gives public notice.

b) His share shall not be liable for any acts of the firm done after date of the notice.

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 effect the provisions of Partner as Estoppel.

© The People Bookmark | 2020

  • LinkedIn
  • Facebook
  • Instagram