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The indian-partnership-act

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The indian-partnership-act

  1. 1. The Indian PartnershipThe Indian Partnership ActAct
  2. 2.      A partnership is the relationship A partnership is the relationship  between persons who have agreed to between persons who have agreed to  share the profits of a business share the profits of a business  carried on by all or any of them carried on by all or any of them  acting or all. acting or all. 
  3. 3.  In India it is governed by the Indian In India it is governed by the Indian  Partnership Act, 1932, which extends Partnership Act, 1932, which extends  to the whole of India except the to the whole of India except the  State of Jammu and Kashmir. It State of Jammu and Kashmir. It  came into force on 1st October 1932. came into force on 1st October 1932.    
  4. 4.  ELIGIBILITYELIGIBILITY  A partnership agreement can be A partnership agreement can be  entered into between persons who are entered into between persons who are  competent to contract. Every person competent to contract. Every person  who is of the age of majority according who is of the age of majority according  to the law to which he is subject and to the law to which he is subject and  who is of sound mind and is not who is of sound mind and is not  disqualified from contracting by any law disqualified from contracting by any law  to which he is subject can enter into a to which he is subject can enter into a  partnership.partnership.
  5. 5.  The following can enter into a The following can enter into a  partnershippartnership  INDIVIDUALINDIVIDUAL    FIRMFIRM    HINDU UNDIVIDED FAMILYHINDU UNDIVIDED FAMILY    COMPANYCOMPANY    TRUSTEESTRUSTEES
  6. 6.  INDIVIDUALINDIVIDUAL:: An individual, who is An individual, who is  competent to contract, can become a competent to contract, can become a  partner in the partnership firm. If partner in the partnership firm. If  there are more than two partners in there are more than two partners in  a firm, an individual can be a partner a firm, an individual can be a partner  in his individual capacity as well as in in his individual capacity as well as in  a representative capacity as Karta of a representative capacity as Karta of  the Hindu undivided family. the Hindu undivided family. 
  7. 7.  FIRMFIRM: A partnership firm is not a : A partnership firm is not a  person and therefore a firm can not person and therefore a firm can not  enter into partnership with any firm enter into partnership with any firm  or individual. But a partner of the or individual. But a partner of the  partnership firm can enter into partnership firm can enter into  partnership with other persons and partnership with other persons and  he can share the profits of the said he can share the profits of the said  firm with his other co-partners of the firm with his other co-partners of the  parent firm. parent firm. 
  8. 8.  HINDU UNDIVIDED FAMILYHINDU UNDIVIDED FAMILY: A : A  Karta of the Hindu undivided family Karta of the Hindu undivided family  can become a partner in a can become a partner in a  partnership in his individual capacity, partnership in his individual capacity,  provided the member has provided the member has  contributed his self acquired or contributed his self acquired or  personal skill and labour personal skill and labour 
  9. 9.  COMPANYCOMPANY: A company is a juristic : A company is a juristic  person and therefore can become a person and therefore can become a  partner in a partnership firm, if it is partner in a partnership firm, if it is  authorised to do so by its objects.authorised to do so by its objects.
  10. 10.  TRUSTEESTRUSTEES: Trustees of private : Trustees of private  religious trust, family trust and trustees religious trust, family trust and trustees  of Hindu mutts or other religious of Hindu mutts or other religious  endowments are juristic persons and endowments are juristic persons and  can therefore enter into partnership, can therefore enter into partnership,  unless their constitution or objects unless their constitution or objects  forbidforbid
  11. 11.  NUMBER OF PARTNERSNUMBER OF PARTNERS  The number of partners in a firm The number of partners in a firm  shall not exceed 20 and a shall not exceed 20 and a  partnership having more than 20 partnership having more than 20  persons is illegal. persons is illegal.     If the partnership is between the If the partnership is between the  karta or member of Hindu undivided karta or member of Hindu undivided  family the members of the joint family the members of the joint  Hindu family will not be taken into Hindu family will not be taken into  account.account.
  12. 12. ESSENTIALS OF AESSENTIALS OF A PARTNERSHIPPARTNERSHIP  AGREEMENTAGREEMENT - The relationship  - The relationship  between partners arises from between partners arises from  contract and not status. If after the contract and not status. If after the  death of sole proprietor of a firm, his death of sole proprietor of a firm, his  heirs inherit firm they do not become heirs inherit firm they do not become  partners, as there is no agreement partners, as there is no agreement  between them between them 
  13. 13.  SHARING OF PROFITSSHARING OF PROFITS – The  – The  partners may agree to share profits partners may agree to share profits  out of partnership business, but not out of partnership business, but not  share the losses. Sharing of losses is share the losses. Sharing of losses is  not necessary to constitute the not necessary to constitute the  partnership. The partners may agree partnership. The partners may agree  to share the profits of the business in to share the profits of the business in  any way they like. any way they like. 
  14. 14.  BUSINESSBUSINESS – Business includes  – Business includes  every trade, occupation, or every trade, occupation, or  profession. There must be course of profession. There must be course of  dealings either actually continued or dealings either actually continued or  contemplated to be continued with a contemplated to be continued with a  profit motive and not for sport or profit motive and not for sport or  pleasure. pleasure. 
  15. 15.  RELATION BETWEEN PARTNERSRELATION BETWEEN PARTNERS– –  The partner while carrying on the The partner while carrying on the  business of the partnership acts a business of the partnership acts a  principle and an agent. He is a principle and an agent. He is a  principal because he acts for himself, principal because he acts for himself,  and he is an agent as he and he is an agent as he  simultaneously acts for the rest of simultaneously acts for the rest of  the partners.the partners.
  16. 16. GENERAL DUTIES OF AGENERAL DUTIES OF A PARTNERPARTNER  Subject to a contract to the contrarySubject to a contract to the contrary between the partners the following are thebetween the partners the following are the duties of a partner.duties of a partner.  To carry on the business of the firm to theTo carry on the business of the firm to the greatestgreatest common advantagecommon advantage. Good faith. Good faith requires that a partner shall not obtain arequires that a partner shall not obtain a private advantage at the expense of theprivate advantage at the expense of the firm.firm. 
  17. 17.  Where a partner carries on a rivalWhere a partner carries on a rival business in competition with thebusiness in competition with the partnership, the other partners arepartnership, the other partners are entitled to restrain him.entitled to restrain him.
  18. 18.  To beTo be just and faithfuljust and faithful. Partnership. Partnership as a rule is presumed to be based onas a rule is presumed to be based on mutual trust and confidence of eachmutual trust and confidence of each partner, not only in the skill andpartner, not only in the skill and knowledge, but also in the integrity,knowledge, but also in the integrity, of each other partnerof each other partner
  19. 19.  To renderTo render true accounts and fulltrue accounts and full informationinformation of all things done byof all things done by them to their co-partners.them to their co-partners.  ToTo indemnify for loss caused byindemnify for loss caused by fraudfraud. Every partner shall indemnify. Every partner shall indemnify the firm for loss caused to it by histhe firm for loss caused to it by his fraud in the conduct of the businessfraud in the conduct of the business of the firm.of the firm.
  20. 20.  Not to carry on businessNot to carry on business competing with the firmcompeting with the firm. If a. If a partner carries on any business ofpartner carries on any business of the same nature as and competingthe same nature as and competing with that of the firm, he shallwith that of the firm, he shall account for and pay to the firm allaccount for and pay to the firm all profits made by him in that business.profits made by him in that business.
  21. 21.  ToTo indemnify the firm for willfulindemnify the firm for willful neglectneglect of a partner. A partner shallof a partner. A partner shall indemnify the firm for any lossindemnify the firm for any loss caused to it by his willful neglect incaused to it by his willful neglect in the conduct of the business of thethe conduct of the business of the firm.firm.
  22. 22.  ToTo carry out the dutiescarry out the duties created bycreated by the contract. The partners are boundthe contract. The partners are bound to perform all the duties created byto perform all the duties created by the agreement between the partners.the agreement between the partners.
  23. 23. RIGHTS OF THE PARTNERSRIGHTS OF THE PARTNERS  Subject to a contract to theSubject to a contract to the contrary a partner has thecontrary a partner has the following rights.following rights.  To take part in the conduct andTo take part in the conduct and management of the businessmanagement of the business  To express opinion in mattersTo express opinion in matters connected with the business. He hasconnected with the business. He has a right to be consulted and heard ina right to be consulted and heard in all matters affecting the business ofall matters affecting the business of the firmthe firm
  24. 24.  To have free access to all theTo have free access to all the records, books of account of the firmrecords, books of account of the firm and take copy from them.and take copy from them.  To share in the profits of theTo share in the profits of the business. Every partner is entitled tobusiness. Every partner is entitled to share in the profits in proportionshare in the profits in proportion agreed to between the parties.agreed to between the parties.
  25. 25.  To get interest on the payment ofTo get interest on the payment of advance. Where a partner makes for theadvance. Where a partner makes for the purpose of the business, any payment orpurpose of the business, any payment or advance beyond the amount of capital headvance beyond the amount of capital he has agreed to subscribe, he is entitled tohas agreed to subscribe, he is entitled to interest thereon at the rate of 6% perinterest thereon at the rate of 6% per annum.annum.  To be indemnified by the firm againstTo be indemnified by the firm against losses or expenses incurred by him for thelosses or expenses incurred by him for the benefit of the firm.benefit of the firm.
  26. 26.  RESTRICTIONS ON AUTHORITY OFRESTRICTIONS ON AUTHORITY OF A PARTNER -A PARTNER -Restrictions are governedRestrictions are governed byby ContractContract and by theand by the PartnershipPartnership Act .Act .  The partners may by contract extend orThe partners may by contract extend or restrict the implied authority of anyrestrict the implied authority of any partner.partner.
  27. 27.  Under the Partnership Act in theUnder the Partnership Act in the absence of any usage of trade to theabsence of any usage of trade to the contrary, the implied authority of acontrary, the implied authority of a partner does not empower him to dopartner does not empower him to do the following acts:the following acts:  Submit a dispute relating to theSubmit a dispute relating to the business of a firm to arbitrationbusiness of a firm to arbitration  Open a bank account in his ownOpen a bank account in his own namename
  28. 28.  Compromise or relinquish any claimCompromise or relinquish any claim of the firmof the firm  Withdraw a suit or proceeding onWithdraw a suit or proceeding on behalf of the firmbehalf of the firm  Admit any liability in a suit orAdmit any liability in a suit or proceeding against the firmproceeding against the firm
  29. 29.  Acquire immovable property onAcquire immovable property on behalf of the firmbehalf of the firm  Transfer immovable propertyTransfer immovable property belonging to the firm, orbelonging to the firm, or  Enter into partnership on behalf ofEnter into partnership on behalf of the firm.the firm.
  30. 30. RIGHTS OF A MINORRIGHTS OF A MINOR  A person who is a minor accordingA person who is a minor according to the law to which he is subjectto the law to which he is subject may not be a partner in a firm, but,may not be a partner in a firm, but, with the consent of all the partnerswith the consent of all the partners for the time being, he may befor the time being, he may be admitted to the benefits ofadmitted to the benefits of partnership.partnership.
  31. 31.  Such minor has a right to such shareSuch minor has a right to such share of the property and of the profits ofof the property and of the profits of the firm as may be agreed upon, andthe firm as may be agreed upon, and he may have access to and inspecthe may have access to and inspect and of the accounts of the firmand of the accounts of the firm
  32. 32.  Such minor’s share is liable for theSuch minor’s share is liable for the acts of the firm, but the minor is notacts of the firm, but the minor is not personally liable for any such act.personally liable for any such act.  Such minor may not sue the partnersSuch minor may not sue the partners for an account or payment of hisfor an account or payment of his share of the property or profits of theshare of the property or profits of the firmfirm
  33. 33.  At any time within six months of hisAt any time within six months of his attaining majority, or of his obtainingattaining majority, or of his obtaining knowledge that he had been admitted toknowledge that he had been admitted to the benefits of partnership, whichever datethe benefits of partnership, whichever date is later, such person may give public noticeis later, such person may give public notice that he has elected to become or not tothat he has elected to become or not to become a partner in the firm, and suchbecome a partner in the firm, and such notice shall determine his position asnotice shall determine his position as regards the firm, provided that, if he failsregards the firm, provided that, if he fails to give such notice, he shall become ato give such notice, he shall become a partner in the firm on the expiry of thepartner in the firm on the expiry of the said six months.said six months.
  34. 34.  Where any person has been admittedWhere any person has been admitted as a minor to the benefits ofas a minor to the benefits of partnership in a firm, the burden ofpartnership in a firm, the burden of proving the fact that such personproving the fact that such person had no knowledge of such admissionhad no knowledge of such admission until a particular date after theuntil a particular date after the expiry of six months of his attainingexpiry of six months of his attaining majority shall lie on the personmajority shall lie on the person asserting that factasserting that fact
  35. 35.  Where such person becomes aWhere such person becomes a partner-partner-  his rights and liabilities as a minorhis rights and liabilities as a minor continue upto the date on which hecontinue upto the date on which he becomes a partner, but he alsobecomes a partner, but he also becomes personally liable to thirdbecomes personally liable to third parties for all acts of the firm doneparties for all acts of the firm done since he was admitted to the benefitssince he was admitted to the benefits of the partnership, andof the partnership, and
  36. 36.  his share in the property and profitshis share in the property and profits of the firm shall be the share toof the firm shall be the share to which he was entitled as a minorwhich he was entitled as a minor
  37. 37.  Where such person elects not toWhere such person elects not to become a partner-become a partner-  his rights and liabilities shall continuehis rights and liabilities shall continue to be those of a minor upto the dateto be those of a minor upto the date on which he gives public notice,on which he gives public notice,  his share shall not be liable for anyhis share shall not be liable for any acts of the firm done after the dateacts of the firm done after the date of the notice, andof the notice, and  he shall be entitled to sue thehe shall be entitled to sue the partners for his share of the propertypartners for his share of the property and profits.and profits.
  38. 38.     DISSOLUTION OF A FIRMDISSOLUTION OF A FIRM  A firm may be dissolved in theA firm may be dissolved in the following mannerfollowing manner  Dissolution by CourtDissolution by Court  Dissolution by agreementDissolution by agreement  Dissolution by operation of lawDissolution by operation of law  Dissolution on the happening ofDissolution on the happening of certain contingenciescertain contingencies  Dissolution by noticeDissolution by notice
  39. 39.  DISSOLUTION BY COURTDISSOLUTION BY COURT  The court may dissolve a firm at the suitThe court may dissolve a firm at the suit of any partners on any of the followingof any partners on any of the following grounds namely :grounds namely :  INSANITY OF A PARTNERINSANITY OF A PARTNER: that a partner: that a partner has become of unsound mind. The insanityhas become of unsound mind. The insanity of a partner does not ipso facto dissolveof a partner does not ipso facto dissolve the firm and the next friend or continuingthe firm and the next friend or continuing partners has to file suit foe dissolution.partners has to file suit foe dissolution.
  40. 40.  PERMANENT INCAPACITY OF A PARTNERPERMANENT INCAPACITY OF A PARTNER:: that a partner has become permanentlythat a partner has become permanently incapable of performing his duties asincapable of performing his duties as partner.partner.  CONDUCT AFFECTING PREJUDICIALLY THECONDUCT AFFECTING PREJUDICIALLY THE BUSINESSBUSINESS : that a partner is guilty of: that a partner is guilty of conduct, which is likely to affectconduct, which is likely to affect prejudicially the carrying on the businessprejudicially the carrying on the business of the firm.of the firm.
  41. 41.  BREACH OF PARTNERSHIP AGREEMENTBREACH OF PARTNERSHIP AGREEMENT that a partner willfully or persistentlythat a partner willfully or persistently commits breach of agreements relating tocommits breach of agreements relating to the management of the affairs of the firmthe management of the affairs of the firm or the conduct of it’s business or otherwiseor the conduct of it’s business or otherwise conducts himself in matters relating to theconducts himself in matters relating to the business, that it is not reasonably practicalbusiness, that it is not reasonably practical for the other partners to carry on thefor the other partners to carry on the business with him.business with him.
  42. 42.  TRANSFER OF INTEREST OF A PARTNER :TRANSFER OF INTEREST OF A PARTNER : that a partner has in any way transferredthat a partner has in any way transferred the whole of his interest in the firm to athe whole of his interest in the firm to a third party.third party.  LOSSLOSS: that the business of the firm cannot: that the business of the firm cannot be carried on save at a lossbe carried on save at a loss  JUST AND EQUITABLEJUST AND EQUITABLE : on any other: on any other ground that renders it just an equitableground that renders it just an equitable that the firm should be dissolvedthat the firm should be dissolved
  43. 43.  DISSOLUTION BY AGREEMENTDISSOLUTION BY AGREEMENT  A firm may be dissolved with theA firm may be dissolved with the consent of all the partners or inconsent of all the partners or in accordance with the contractaccordance with the contract between the partners. Thebetween the partners. The partnership agreement may containpartnership agreement may contain a proviso that the firm will bea proviso that the firm will be dissolved on the happening of certaindissolved on the happening of certain contingencycontingency
  44. 44.  DISSOLUTION BY OPERATION OFDISSOLUTION BY OPERATION OF LAWLAW  A firm is compulsorily dissolved onA firm is compulsorily dissolved on the following groundsthe following grounds  Insolvency of partnersInsolvency of partners  By the happening of any event whichBy the happening of any event which makes it unlawful for the business ofmakes it unlawful for the business of the firm to e carried on.the firm to e carried on.
  45. 45.  DISSOLUTION ON THEDISSOLUTION ON THE HAPPENING OF CERTAINHAPPENING OF CERTAIN CONTINGENCIESCONTINGENCIES  Subject to contract between theSubject to contract between the partners a firm is dissolved on thepartners a firm is dissolved on the happening of the followinghappening of the following contingencies.contingencies.  If constituted for a fixed term, by theIf constituted for a fixed term, by the expiry of that termexpiry of that term
  46. 46.  If constituted to carry out one orIf constituted to carry out one or more adventures or undertakings, bymore adventures or undertakings, by its completion.its completion.  By the death of a partnerBy the death of a partner  On insolvency of a partnerOn insolvency of a partner
  47. 47.  DISSOLUTION BY NOTICEDISSOLUTION BY NOTICE  If the partnership is at will, the sameIf the partnership is at will, the same may be dissolved by service of amay be dissolved by service of a notice by one partner to dissolve thenotice by one partner to dissolve the firm.firm.
  48. 48. REGISTRATIONREGISTRATION  It is not compulsory to register theIt is not compulsory to register the firm. However there are seriousfirm. However there are serious effects of non-registration.effects of non-registration.
  49. 49.  No suit to enforce a right arisingNo suit to enforce a right arising from a contract or conferred by thefrom a contract or conferred by the Indian Partnership Act shall beIndian Partnership Act shall be instituted in any court by or oninstituted in any court by or on behalf of any person suing as partnerbehalf of any person suing as partner in a firm against the firm or anyin a firm against the firm or any person alleged to be or to have beenperson alleged to be or to have been a partner in the firm, unless the firma partner in the firm, unless the firm is registered and the person suing isis registered and the person suing is or has been shown on the Register ofor has been shown on the Register of firms as a partner in the firmfirms as a partner in the firm
  50. 50.  Similarly, no suit to enforce a rightSimilarly, no suit to enforce a right rising from a contract shall berising from a contract shall be instituted in any court by or oninstituted in any court by or on behalf of a firm against any thirdbehalf of a firm against any third party unless the firm is registered.party unless the firm is registered.
  51. 51.  PROCEDURE FOR REGISTRATIONPROCEDURE FOR REGISTRATION TheThe registration of a firm may be effected atregistration of a firm may be effected at any time by sending by post or deliveringany time by sending by post or delivering to the Registrar of Firms of the area into the Registrar of Firms of the area in which any place of business of the firm iswhich any place of business of the firm is situated or proposed to be situated, asituated or proposed to be situated, a statement in the prescribed form andstatement in the prescribed form and accompanied by the prescribed fee,accompanied by the prescribed fee, stating :stating :  the firm namethe firm name
  52. 52.  the place or principal place ofthe place or principal place of business of the firm;business of the firm;  the names of any other places wherethe names of any other places where the firm carries on business;the firm carries on business;  the date when each partner joinedthe date when each partner joined the firm;the firm;
  53. 53.  the names in full and permanentthe names in full and permanent addresses of the partners; andaddresses of the partners; and  the duration of the firm.the duration of the firm.
  54. 54.  The statement shall be signed by allThe statement shall be signed by all the partners or by their agentsthe partners or by their agents specially authorised in this behalf.specially authorised in this behalf. Each person signing the statementEach person signing the statement shall also verify in the mannershall also verify in the manner prescribed.prescribed.
  55. 55.  A firm name shall not contain any ofA firm name shall not contain any of the following words viz. "Crown",the following words viz. "Crown", ‘Emperor", "Empress", "Empire",‘Emperor", "Empress", "Empire", "Imperial", "King", "Queen", "Royal","Imperial", "King", "Queen", "Royal", or words expressing or implying theor words expressing or implying the sanction, approval or patronage ofsanction, approval or patronage of Government, except when the StateGovernment, except when the State Government signifies its consent toGovernment signifies its consent to the use of such words as part of thethe use of such words as part of the firm name by order in writing.firm name by order in writing.
  56. 56.  All the States have framed rulesAll the States have framed rules prescribing the forms, fee forprescribing the forms, fee for registration and verification of theregistration and verification of the statement. The application forstatement. The application for registration has to be made to theregistration has to be made to the Registrar of Firms in the prescribedRegistrar of Firms in the prescribed formform
  57. 57.  When the Registrar is satisfied thatWhen the Registrar is satisfied that the provisions have been compliedthe provisions have been complied with, he shall record and entry of thewith, he shall record and entry of the statement in a register called thestatement in a register called the Register of Firms and shall file theRegister of Firms and shall file the statement. The Registrar is thestatement. The Registrar is the competent authority and if he actscompetent authority and if he acts bona fide and follows the procedure,bona fide and follows the procedure, his satisfaction cannot be challenged.his satisfaction cannot be challenged.
  58. 58.  CHECKLIST FOR DRAFTING ACHECKLIST FOR DRAFTING A PARTNERSHIP DEEDPARTNERSHIP DEED  A partnership deed should containA partnership deed should contain the following clausesthe following clauses  Name of the partiesName of the parties  Nature of businessNature of business
  59. 59.  Duration of partnershipDuration of partnership  Name of the firmName of the firm  CapitalCapital  Share of partners in profits andShare of partners in profits and losseslosses  Banking, Account firmBanking, Account firm  Books of accountBooks of account
  60. 60.  Powers of partnersPowers of partners  Retirement and expulsion of partnersRetirement and expulsion of partners  Death of partnerDeath of partner  Dissolution of firmDissolution of firm  Settlement of disputesSettlement of disputes

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