Indian Partnership Act, 1932

Indian Partnership Act, 1932 is extends to the whole of India except the State of Jammu and Kashmir. It has come into force on the 1st day of October, 1932

Section4 DEFINITION OF "PARTNERSHIP"

"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.

PARTNERSHIP FIRM(4)
The name under which their business is carried on is called the "firm-name".

MEANING OF PARTNERS(4)
Persons who have entered into partnership with one another are called individually, "partners" and collectively "a firm"

NUMBER OF MEMBERS
minimum number of partners must be two, while the maximum number can be 10 in case of banking business and 20 in all other types of business

FEATURES OF THE FIRM

1. 2. 3. 4. 5. 6. Agreement No of members Sharing of returns carried on by all or any of them acting for all Principal agent relationship Contractual relationship

Types of partners
There are various types of partners in a partnership firm. They are as follows: 1. Active partner 2. Sleeping 3. Minor 4. By estoppel 5. Sub-partner 6. Normal 7. Partner in profits

Active partner
Partner who takes an active part in the management of the business is called active partner. He may also be called 'actual' or 'ostensible' partner. He is an agent of the other partners in the ordinary course of business of the firm and considered a full fledged partner in the real sense of the term.

Sleeping partner
A sleeping or dormant partner is one who does not take any active part in the management of the business. He contributes capital and shares the profits which is usually less than that of the active partners. He is liable for all the dues of the firm but his relationship with the firm is not disclosed to the general public.

Nominal partner
A partner who simply lends his name to the firm is called nominal partner. He neither contributes any capital nor shares in the profits or take part the management of the business. But he is liable to third parties like other partners. A nominal partner must be distinguished from the sleeping partner. While the nominal partner is known to the outsiders and does not share in the profits, the sleeping partner shares in the profit a his relationship is kept secret.

Partner in profits
A partner who shares in the profits only without being liable of the losses is known as partner in profits. He does not take part in the management of the business but he is liable to third parties for all the debts of the firm.

sub-partner.
When a stranger shares the profits derived from the firm by a partner he is regarded as a subpartner. A sub-partner is in no way connected with the firm or he not a partner of the firm. He is simply a partners' partner. Therefore, he has no rights against the firm nor he is liable for the debts of the firm. He only shares profits from a partner.

Partner by estoppel
When a partner is not a partner but represent to the outside world that he is a partner in a firm, he is stopped or prevented from denying the truth. He is considered as a partner in the eyes of law. such persons are liable to outsiders

Minor partner
Partnership arises from contract and a minor is not competent to enter into contract. Therefore, strictly speaking, a minor cannot be a full-fledged partners. But with the consent of all the partners he can be admitted into partnership for benefits only. He is not personally liable to third parties for the debts of the firm, on attaining majority, if he continues as a partner, his liability will become unlimited with effect from the date of his original admission into the firm.

Procedure for Registration of a Partnership

under Section 58 of the Act, a firm may be registered at any time ( not merely at the time of its formation but subsequently also ) by filing an application with the Registrar of Firms of the area in which any place of business of the firm is situated or proposed to be situated.

Contents of the application sec 58

name of the firm
place or principal place of business names of any other places where the firm carries on business. date on which each partner joined the firm name in full and permanent address of partners.

duration of the firm

Procedure for registration

Application shall be signed and verified by all the partners or their duly authorized agents. Application shall be accompanied by prescribed fee

Documents to be submitted along with the filled application

certified true copy of the Partnership deed entered into.
ownership proof of the principal place of business

Name of the firm should not contain any words which may express or imply the approval or patronage of the government except where the government has given its written consent for the use of such words as part of the firms name.

Issue Certificate of Registration sec59.

Under Section 59 of the Act, when the Registrar of Firms is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in the Register of Firms and issue a Certificate of Registration.

Dissolution
Dissolution of the firm denotes complete breakdown of the contractual relationship between all the partners or termination of the partnership business. But when the existing contractual relationship is terminated and the business continues, it is a case of dissolution of partnership.

Modes of Dissolution of a Firm:

1. Dissolution by Agreement 2. Dissolution by Notice 3. Dissolution on the happening of certain contingencies 4. Compulsory Dissolution 5. Dissolution by the Court

Dissolution by agreement
Partnership arises from contract and can come to an end by contract. Therefore, the firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners.

Dissolution by notice
Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing of his intention to dissolve the firm. The firm is dissolved from the date mentioned in the notice as the date of dissolution. An individual partner is empowered to bring an end to the firm.

3. Dissolution on the happening of certain contingencies:

i. Expiry of the term when constituted for a fixed term. ii. Completion of the venture or undertaking when the firm constituted to carry on a venture or undertaking. iii. Death of a partner. iv. Adjudication of a partner as an insolvent. The partnership agreement may provide that the firm will not be dissolved in any of the above circumstances.

Compulsory Dissolution:
A firm is compulsorily dissolved under any of the following circumstances : i. When all the partners or all but one are adjudged insolvent. ii. When the business of the firm becomes unlawful because of happening of some event.

Dissolution by court
When the partners are having difference of opinion regarding dissolution of the firm on certain grounds, a suit can be filed by any partner in the court to dissolve the firm. Under Section 44 of the Act, the court may dissolve the firm on the following grounds :

Modes of dissolution by court

Insanity. Permanent incapacity. Misconduct. Breach of agreement. Transfer of interest. Continues losses. On any grounds.