| cre 51 Nature of Partnership CHAPTER CONTENTS 2 Denton ot Pannership © Cbs 2 Law of Partnership An Extension ofthe Law | G Duration of Partnership of Agenay 1G Registration of Fis 1D Fomnation of Partnership > Procedure for Registration (Secs. 58 and 58) 1 Partners, Firm, Firm Name 9 Timo of Pogistration 9 Partnership and Firm © Efscts of Non-regsraton (Sec. 68) 1 Test of Parnorship ‘summary Q Patnership end Other Assocatins Objective Type Questions © Partrorenip ‘ost Questions 9 Partearship and Co-ownarship Practical Problems ‘The law of parinership is contained in the Indian Partnership Act, 1932, which came into fore on Ist October, 1932. Prior tothe enactment ofthis Act, it was embodied in Chapter XI ofthe Indien Contract ‘Ac, 1872, twas, however, found thatthe provisions relating toparinership, as contained in the Contract ‘Aqt, were not exhaustive. Hence the present Parnership Act. The Act is substatially based on the English Law on the subject as contined inthe Partnership Act, 1890. The main principles are the same butat places certain alterations have been made to adept the law tothe peculiar conditions prevling in India. The mostimportant change brought about by the Acti the provision forthe registration of firms, ‘Acontract of partnership isa special contract. Where the Partnership Actissilenton any point, the general principles of the law of contract apply (See. 3), Tn Chapters $-1 to 5-3, unless otherwise stated, Sections referred t are those of the Indian Partnership Act, 1932 DEFINITION OF PARTNERSHIP Partnership isthe relation benween persons whohave agreed shate the profits of business caried on byall orany of them acting for ll Sec. 4 para 1). Persons whe have entered into parmership with one another are called individually ‘partners’ and collectively ‘a firm’ (See. 4, para 2). Ive analyse the definition ofpartnership, the following essential characteristics stand out : 1. Asseciation of two or more persons. There should be at least two competent persons to form “apottnersbip. As regards themaximum numberof partners in a firm, Sec. 11 ofthe Companiesaw of Contract * Special Contracts ination caring onbaoking snes shoulda If the number of partners ‘exceeds this limit, the nn emp itienumber seduced ‘Act, 1956 provides thatthe number of partners ncoed tem and in any othr business twenty. farmers comes an illegal sociation, Ieease 10 fo one by any reason. ee Dita enna nr ent che tn Incomes RIT. (350 S38) TH ES Ty tropa ims ret e S eaaty arntechip ou of heir separate ims provided their mmber des n fom paras ct of i ge ening of Se. 4 [0a Plinood v Reperof Fa a ay cas 209 (Ket), ay, ring an ety snc fom is members, ter aan cect partnership fits authorised by is Memorandum of Association [S Co. Lid. v. Comme, of Incomesax, A.LR. (1958) S.C. 315}. ‘i 2, Agresment. The patership elation sone of contractual nature tries frm contact and Not {re statas (See. 5 pra 1), agreement betwee the partners iste bass ofthis ostac. The iaement nay be expressed (Le, ofl o written or implied. impid agreement may bi Teer the cause of dealing othe conduct of the partes. The agreement may be for a fixed Petts cor the exseation ofa patcular adventure, or it may give option to the partners PeThdraw fom the partmership a any time, Partership is thus created by contract it dors not ioc by operation af law (as inthe case of co-owners) o from satus (asin the case of «Joint Hindu Fara) or fom inberitzce. Partnership agreement, like any other contract, must have al the essential element ofa vali contract, ; 3. Business. A partnership canbe formed only forthe purpose of camying on some business, ‘Hosines’ nies every trade, occupation and profession [(See.2 (8)]. The word “business” {generally cenveys the idea of araning business volving numerous transactions Besides that Fern may Become a prter wi another na rarticlar adventure. The business tobe earied fon by the fim must be legal. |. Sharing of profits. The object of partnership must be to make profit. Profit means net profit, qe, exces of retuas over olay, the excest of what i obtained over the eost of ob rote mustbe dstrbuted among the partners inan agreed rato, I any person claiming to be a parine is deprived of his right to share in the profs of the busines, he is not a partner as his Exrying ov the Busnes sno for profit. But the reverse isnot necessarily tro. A person may Share in the profits of partnenip, but stil he may not be a partner. The sharing of profit also involves saring of los which in fc is negative profit. But as between the partner, it may be agreed that one oF more ofthe partners shall note liable for losses, '5, Mutual agency. The busines of partnership maybe carried on by all the partners or any of them acting foal. A prtnerisboh an agent (nthe sens that he an bind bys acs the other partners) nd the pina Gn the tenes that he can be bound by the ees of the other partners) Tho question weer a persons ois nota pre depends in early all eases upon whee he asthe aot © ‘tie hoa sity per whe had parr hn aos at fo him. {Law of Partnership ~ An Extension of the Law of Agency ‘The partnerhpbsiess may be caied on yal hparners any ofthe ating for al Thus ‘Hitoshi ona end agen oablshe song paren a ie atone one oy he ib of agency. S18 aio provides at subject te poison of he Pannen Sets prt the agent ofthe firm forthe purposes ofthe business ofthe firm, The leading ease on the point is : eeSa QQNr=--- i ©» Nature of Partnership 27 Hickman, (1860) H.L.C. 268, 4 trader carried on his business under the supervision of his the business was to pay them off out of the profits of the the trader nd the creditors. It was rightly observed in cox ¥. creditors. The object of carrying on business, “eld, no parteership existed between this case, “The law a (9 partnership is undoubtedly a branch of the law of the principal and agent. The ability of one partner forthe acs of his co-partners is in traththe liability ofa principal forthe acts of fis panes when 1W9 oF more persons are eagaged as parc in aa ordinary trade, each of them has tn ilied authority from the others to bind all others by contracts entered into according to usual course of business in that trade..." ‘A partner assumes a ofl characier 1. He is an agent of the fim 30 far his dealings with the outside world for the purposes of the business of the firm are concerned, He ean bind the fiem by his aets provided (i) the acts are ‘within the scope of his authori, (i) they are donein the firm's name, and (i) they are done for the purposes ofthe business ofthe frm: 2. He is aprincipal so far asthe other partners ure concerned. The relation ‘between the partners inter se (ie. between oF among themselves) is that of principals Example. A, Band Ce partes in a business. D,an ousier, deals withthe frm through ‘A dsbetwoon Aand 0 Ais the principal. But as between A Band C, Ais also the agent Of Banc As such A. 8 and C canallsue D.Dcan also sue A, Band CFurtermore Ais ‘accountable to Band C because he isin this transacton an agent of B and C. To suin up : the law of partneship governing relations of the partners iner se and with the outside ‘world is an extension ofthe law of principal and agent ~ FORMATION OF PARTNERSHIP “Aparinershipis baced onanagreement. The partnership agreement may be made orally or in writing or ‘may be implied from the course ofdealing amongpartners, However all he essential elements ofa valid ‘contract must be present. There ste free and genuine consent ofthe parties who must be competent tocontrat. The object of the partnership shouldbe lawl and oer legal formalities should be complied ‘ith Bat the following two points shouldbe noted in this connection: (1) Minor partner. A minor may be admitted tothe bereft of parmership with the consent ofall the other parners. The law relaing to a minor pertner has been discussed at lngth late. (@) Consideration. As no consideration is required to create an agency (Sze. 183 of the Indian ‘Contract Act, 1872), no consideration is required to create partnership which isan extension of the law of agency Partnership deed. The agreement creating partnership may be expressed («, oral oF writen) or implied, andthe later may be infeed fom te conductor the course of dealing ofthe parties or from the crcumsances of the case. However, itis in the inferet of the partners tha the agreement must be in writing. The document which comans this agreements called partnership deed. It usually contains Dcovisionsrlating tothe naturear ae principal plece ofbusiness, the name of the frm, the names and Adresses ofthe partners. the dura an ofthe firm, profit-sharing rato, interest on capital and drawings, ‘aluation of goodwill on the death oretrement of aparner, management, accounts, arbitration, ete ‘The deed must be duly stamped as required bythe Indian Stamp Act, 1889. Who may be partners ? A contractofpartnershipmay be entered itoby every person who is competent emer ita coat [See 1 oft ln Cotte 1872‘aw of Contract * Spectal Conracis a8 Law of pe act en enemy An on ney cnn nar oto ones of pemesi? ‘with an Indian subject. An sign fiend eam do 50, Minor. A minor cannot become a partne inf ‘be admitted to the benefits of partacrship- Person of unsound mind. A person of uns partnership, : 1 contract of hip asa Corporation, A corporation, fe, mrejateod company, can emt ito con of PETE Sing intial bt nc asa group ofindvduals comprising i [4 Maraza (il Industries Pvt) had set Sunyunarayana Chettiar, (1963) 33 Comp, Cas. 833 (Mad). PARTNERS, FIRM, FIRM NAME ‘enone who have eneed into parnertip with one anther are called individually “parte ond earache tandtho none nde wich the busines caiedcmiacaled he frm sme’ Th spar] The firm name only ashon way of expressing the names of ll he nertaes, i PSE sr a lauy cary cntbsincasunderany named style which they peas to adopt. Butthisi abet tothefellowingtwolimiatcns: {U) A fimnname sal rocontain any words expresingor implying the sanction. approval orpaonage aoime Goveaunent The State Government ma, however, Signi its consent to the wo of ich Swords by a fim as part ofits same by order in wring (Ses. 58 G3] {@) Tae law safeguards the trade names and goodvill of other persons who are dreads jp existence, The mere fat thata firm kas already been doing business under a cerain name flocs not prevent new firm fiom adopting it But ifthe name is used with # Fandulest fntention, the law will intervene. The firm mey be restrained from the adoption of such name by injunction Partnershipand Firm Partnership is merely an bstit legal elation between the parners, Is, in other words, en abstract thing. A fimisa collective name forall th parmers Its s concrete thing, Partnership may be styled the invisible ie binding the partners together. The fim is the visible body (collective group) of thors parters who are thus bound together. an but with the consent ofall the other partnesshe may und mind is not competent 10 enter into a contract of Legal status of firm, fa mercantile or commettial usage, 0 firm is deemed to have existence distinct {fom theparners constuing itn sone ofthe continertalcounries also fim is recognised as es person dant fom the porters corttuting it But ia England and Ina, fm isnot a dint el entity apart fromthe partners constituting it [Malabar Fisheries Co. v. Commnr. of Income-tex, Kerdls ‘ALR. (1980) S.C. 176} Unlike a company which isa corporate boy, i is not regarded as «person ia th eet thee Fin onyx comedies xin, argd name er ei io compo Ma a Chto Mitpaly AIR. 1979] 8.1250); tis as legal ene same my anaerobes fol pachr The igh nao realy the rights and obligations of the partners who eorapose the fim, be he sa: pre no ie fms ensue oe frm ? An acest vet camry on a business and share its profits may be followed 34 between the same pamers cary on anober business and share tec wll depend terion tee hygeine ae ein. ceedsNature of Partnership 279 (2) constitute two separate partnerships and therefore two distinct firms, or (®) extend merely a parinership, orginally constiuted to carry on one business, tothe eartying on of another business, ‘The intention ofthe partners will have wo be decided with reference fo the terms ofthe sgreement andall the surrounding circumstances including evidence as to the interlacing (entangling together) oF trlocking (uniting together) of management, finance and other incidents ofthe respective hisinesses (Deputy Comme: of Sates Tax (Law) v. K. Kelukuty, A.LR. (1983) 8.C. 1143] TEST OF PARTNERSHIP In orderto determine the existence of parnership between a group of persons, the definition in Sec. 4 ‘used as atest, ie, one must look tothe agreement butween them. Ifthe agreement isto share the profits of a business, and the business is carried on by all er any of them acting fora there is puarinership, otherwise not. The difficulty arses when there is no specific agreement constituting parinerchip among the partners or the agreement is such as docs no specifically speak of partnership, in such a case, we have to refer t Sex. 6 which embodies the rue Ind down in the case of Cox v. Hickman, (1860) HL. 268. Real relation isthe basis. The reneral principle which serves as «gue to determine wheter a group ‘of persons doe or does not constitute partorihip as ln down in Sec. 6 is as fllows “In determining whether a groap of persons is or nota fim, or whether a persons ors not «partner in a firm, regard shall be had to tbe real relation Between the partes, a shown byl relevant facts taten gether”. Determination of real relation. The ral relation between the patissis to be determined fom all he facts, ie, the writen or verbal agreement, surrounding circumstances at he time when the contrat \was entered int, condiet ofthe partes, and other relevant facts e-books of exoun,corespendence, ‘evidence of employees, ec: These facts are not considered individually to ascertain the existence of partnership, butare taken collectively andthsircumulativectfectis taken nso consideration Ineffett Fbthe substance of the thing, and not the frm, that at to he locked to. The pastes may expres state {na document thatthey are noi parters but they may tur outtobe partners inthe eyes of tela, when al the other fats are taken info account. Again, a taterent by the paris ina documenta they are partners may not necesavily constitute them partners in lw. Mixed question of law and fact. Whether a genuine parinership exists or not isa mixed question of Jaw and fac, The fact hat 2 partner Was ented toa fixed percentage of profs of the frm only and not io share its losses and he was excluded from operating bank accounts of the ‘rm, were inconsequential to detemaization of the question [!elper Girdhorbholv Saiyed MM, Kadri, (1987) 38S. $38] Cases where no partnership relation. Sec, 6 enumerates, in its wo Explanations, cases where the pancership reiation does not exist These cases ae 1. Joint owners sharing gross returns. Joint owners ofpropety sharing profits or gsr retaras farising fom the property do not become parners Explanation 1 to Sec. 6) ample. Aaa By yuciacd ten sop, ach ofthe conus a ha fhe Example, a 2 ra case lotr ara Toy endothe sop agente car ed ey wore G-wnerard lpr [orn Wa tage ara. (1080 Pana 120)ey Law of Contract + Special Contracts If, however, co-owners start a business with a view to sharing the profits of the business, they become partners. 2 Sharing of profits. The sharing bf profits is prima faciea strong evidence of partnership butte ‘act that there is sharing of profits between some persons will not automatically make them partners. Therefore, receipt by a person of a share of the profits of business, or of a peyment contingent upon the eaming of profits or varying withthe profits earned by the business, doesnot ofits make him a pariner with the persons carrying on the business, In particular, there is no partnership ~ (@) Where « person tas lent money to persons engaged or about to engage in business, and receives a rae of interest varying withthe profit. Example, A advanced money to two merchants who agreed to cerry on the business subject tothe contol ofA in several respects, A was to receive a commission of 20 per ‘cent on all profits, Held there was ne parinership (Mollow March & Cav. The Court of Wards, (1872) LAL2.CP419}. (8) Where servant orageat is engaged ina business and receiveshis remuneration ae share of profit Example, Aa contreor fer loating and unloading ralway wagons, appointed a servant to manage i. Ths servant was to recsive 75 per cert of he profs and was fo bear all losses i ary Hel the servant was the agont of And not his partner [Munshi Abdul Lat! ¥-Gopestiar; AR, (1933) Cal. 24) (©) Where the widow or child of deceased partner receives a portion of the profits, (@) Where person tas sold his business along with its goodwill and receives a portion of the profits in consideration ofthe sale (Explanation 2 to See. 6). Although the sharing of profits of « business is a strong test of partnership. yet whether the ‘elation of partnership does or does not exist must depend upon the real intention and conduct of the partes, ‘The real test is mutual agency. To conclude, sharing of profitsby apersos ofthe contibation ‘but whether the business is carried on by him ‘agency between them. [relation of principal formed with a view to eam profits of a busines ne may say that the true test ef partnership isnot the of capital or the holding ofa particular property jointly, or by another on his account so that there is a nnatual ind agent exists between the parties constituting @ UP, Ss, We can say that there is partnership, Who are not partners (Sec, 5. pra 2)? The followin 8 (in addition to those already dise We mands ig Persons (in addition to those already discussed) 1, The members of Hindu undivi ied family carying on family business as 2. A Burmese Buddhist husband Sry oe Ok mily business as such ‘nd wife carying on business as such, PARTNERSHIP AND OTHER ASSOCIATIONS Partnership ang Joint Hindu Family ° Abusiness in Hindu Law is «heritable asset, If lescenc i Hr aejcasset Ian ancestral business descends on the members of ajoint Sree tear sath te ncn Such besiness is called a joint family busines. THE 10 family carrying on family business as re not ers in st ness sf eres eg __Nature of Partnership 281 Mode of creation. Partnership is essentially the reslt of an agreement. A joint Hindu family arses from sans ands not the result ofan agreement (Sc. 5, paca 1). arses by operation of 2. Interest in business. In partnership a person does not acquire interest in partnership business by birt. I isthe result ofan agreement In joint Hindu family business, the male members acquire intrest by bith, 3+ Admission of new members. In partnership, a new partner can be admitted only with the ¢onsent fal the partes. In joint Hind family business, mule besomes a member by his (@) Female members. A female can become a fullledged partner in partnership, whereas ina Joint family business, a female does not become its member by birth. (©) Minor members. In parnecshp; a minor can be admitted tothe benefits of partnership with ‘he consent ofthe other pares. Ina joint Hindu family business, a male minor becomes its ‘member mecely by bith { (©) Membership fluctuating. In parmership, the numberof partners should not exceed ten in case ofa firm carying on banking business and twenty in case of aay other business. Ina joint Hindu family business, there is no limit to the maximum numberof members. 44. Authority of members. in parinership cach partner has implied authorty to bind the fir by ‘acts done in the ordinary course ofthe business of the frm. Ina joint Hindy family business, only the Karta (usually the eldest male member of the family) has implied authority to contact debis and pledge the credit and the prope ofthe family for the ordinary pucpases ofthe family basi ss. ‘5. Liability of members. In partnership the lisbilty ofthe parmers is unlimited. Theshare ofeach partner inthe partnership property along with his private property is liable forthe discharge of partnership ibis. Ina joint Hindu frcily business, the Karta is personally liable fr the debs ofthe family whereas te other members are liable ony to the extent of ther interest inthe joint Hindu family business. The otner members are personally Kabieifthey are also contracting parts 6. Right of members to demand accounts. In partnership, every partner has a right to kaye access to and inspect and copy any of the books ofthe firm and ask forthe account of profs and losses. The members of ajoint Hindu family business cannot ask the Karta of the family for accounts of his past dealings concerning the family busines, Similarly, they cannotaskthe Karta for the secount of profits and losses. 17. Registration. In case of parinership. itis not compulsory that it should be registered. But, } indirectly, law has made registration compulsory because an unregistered firm sulfers from certain disabilities. joint Hindu family business does not require any such registration Partnership andCo-ownership Co-ownership means joint ownership of seme property which does notnecessarily re | Inpantnership the partners are necessaily co-owners ofthe property of the Firm, but in ¢o-owaership the co-owners are not necessarily parines. The following are the points of eiffeenes between the } two: 1. Mode of creation. Partnership is necessarily the result of an agreement. Co-ownership mey or may not arise from agreement it may also arise by status, ‘ 2. Buineas. Business is necessary fe the existence of partnership, co-ovnership can exist witout it 1. Nature of interest. Partnership involves community of interest whereas co-ownership may tot ncezssarily iavolve any such interest, in partnership,2 Law of Contract * Special Contract 4, Transfer of interest. A partner cannot transfer his share to a stranger without the consent ofthe other pariners, A co-owner ean. When a co-owner transfers his share, the transferee becomes viswasvis the other co-owners a substitu of the co-owner who transfers his share. 5, Number of members. In partnership, the number of members cannot exceed the statutory limit, In.co-ownership there is no limit on maximum number. 6. Authority of members. A partner isthe agent of his co-partners. A.co-owner is not the agent of the other co-owners, 17. Partition of property. A partner cannot sue for the partition of partrership property in speciebut he can sue his co-partners for the dissolution of the firm and accounts. A co-owner can sue fer the partion of the property, 8. Lien for expenses. A pariner has a lien on the partnership property for expenses incurred by him on such property on behalf of the firm ; a co-owner has no such lien. Clubs ‘Acclub or 2 society, such as a cricket club ora debating society or a residents’ welfare society, is nota parinership, It not formed to eam profi snd its members are not ageats 0 one another and 2s uch ae ‘not liable for one another's acts, A member of a club isnot liable to a creditor except so far as he hs assented to the contract in respect of which such liability has arisen, A club is formed upon the implied condition that its members are nat hound to contribute to its losses beyond the amount of subscriptioe as laid down in the rules wo be paid so slong as be remains « member {Whe v. Perpetual Trustee Co. (1903) A.C., 139}. DURATION OF PARTNERSHIP ‘Thepartners may, atthe time when they enter into partnership agreement, fix te duration ofthe partnership ‘or may say nothing about it In the former ease, the partership is called a parership fora fled term, si inthe later case, a parmership-at-will.Sometimes, a partnership is formed fxr the purpose of carrying 0° ‘particular adventuce or undertaking, In such a cat, it is called a paticularpartnership. Partnership for a fixed term. In this case, the partnership is entered inte for a fixed period of time ‘When the fixed peri is over, it comes fo an end. The partacrs may, however, continue to carry en the basiness after the expiry of the fixed period. In such a case the matual rights and duties of partners remain the same as they were before the expiry of fixed period and the partnership becomes parteership- twill [See. 17 (8), Partnership-at-will. Where no provision is made by contact between the partners for the dara the partnership, or for the determination of the partwership, the parmership is “partnership (Sec. 7). may be dissolved by any partner by giving a notice in writing tall other partner of his intention t dissolve the firm, When such notice is given, the frm is dissolved as fiom: the date mentioned in the notice asthe date of dissolution or, ino date isso menicned, as from the date of he ‘commuiestionof the notice (See. 43) [BodhesiwarvJaindha Nath, ALR. (976) Ga. 12}. Apt ati can undoubtedly name a dateas from which te fim would stard dissolved, but that date ca it no case, be prior to the date of issue of his notice (KVP. Thangarauv. K ¥. Perumal, ALR. (1980) Mad, 7]. Thenetice should bean unambiguous intimation ofa final intentoe to disolvepartership. and should be served onal the other partners, Notice once given cannot be wihdrawn unless all the other partners agree wo it Jones v. Lloyd, (1874) LR. 18 Eg. 265]. Particular partnership. When person becomes a pariner with another peron or personsina paticulat ‘adventure or undertaking, such a partnership is known as “particular parinership" (Sec. 8) Itcomes © ofNature of Partnership 283 tan end as soon as that adventure is completed, If itis continued after the completion of thet adventure for which it was entered into, it becomes parinership-at-wil. In such a cate, rights and liabilities ofthe pariaers in respect ofthe other adventures are the same as those in respect of the original adventure or ‘undertaking (See. 17 (c)], REGISTRATION OF FIRMS ‘The Partnership Act does not provide forthe compulsory registation of fms, Ithas lft it tothe option ‘of the firs to get themselves registered, But indirectly, by creating certain disabilities from which an | __ unregistered firm suffers, it has made the registration of firms compulsory. Sec. 69 deals with such | disabilities. These disabilities are such that, sooner or late, every firm has to get itself registered. | __ However, registration does not create partnership ; itis only a reliable evidence of the existence of | partnership. It lso affords protection to outsiders dealing with the firm, Procedure for Registration (Secs. 58 and59) | Themeictatinn ata frm aay he affected at any tin by ling an application in the form of actatement, giving the necessary information, wit the Repstar of Firms ofthe area. See. 57 empowers a Sate | Government to appoint Registrar of Fim forthe purposes ofthe Partneip Act and define the eas within which they’ shall exercise their powers and perform their duties. | ‘The application for registration of a firm shall be accompanied by the prescribed fee. It chall sate : (a) the name of the firm ; |) the place or pacial place of business ofthe frm (6) the names of other places where the finn cares on business | @ the cate when exch partner joined the fem ; (6) the pames in fall and permanent addresses ofthe partes; the duration ofthe frm, The statement shall be signed by all the porters er by their agents specially authorised inthis ‘behalf [Sec. 58 (1)]. It shall also be verified by them in the prescribed manner [Sec. 58 (2)]. For restrictions on the use of certain words in the name of a firm, refer to Sec. 58 (3) discussed earl this Chapter When the Registrars satisfied that the sbove provisions have teen duly complied wit, he shall record an enty ofthe statement in the Register of Firms (maintained by Registar of Frmsiin respect ofeach repistered firm for recording the necessary informacion relating to that fm) and file the Statement (Sec. $9). Ho shall then iste under hit hand a certfiate of registation. Registration is effective fiom the date when the Registrar files the statement and makes entries inthe Register of Fins and not rom the date of prescotatin ofthe statement hima (Conmr of Income-Texv.Jeyaakshmt R&O, Mills, ALR. (1971)S.C. 1015]. Registration to a firm under Sec. $9 cannot bedeclined for the reason of a company being a partner of the firm (MMA Pulinood v, Registrar of Firms, (1987) 6 Comp. Cas, 209 (Ker)}. Time of Registration Astothe time ofthe registration of fim, thee no definite provision in he Act. Sev 9 2) however, eee ea aang fon a enaccan eattedin an Cut yon behalf o a fin agninst any thitd party unless the fim is egisered an he persons sung ae or have shown inthe Reiser of Firms as partners in the finn. In other words, no suit by an unregistered firm s ommpetet nad the only enue open othe Curis to dismiss (Malhotra & Co, Ranesh Misr, Ae (1971) Pung, 212), The point of time contemplated in Sec. 69 (2) isthe time ofthe __284 Law of Contract * Special Contract institution of the suit. That isto say, the firm must bea registered firm by the date of the institution the suit (Shanker Housing Corporation \. Mohan Devi, A.L.R. (1978) Delhi 255]. This mesns bef ‘any suitisfiled in a Law Court, registration must be effected, Subsequent registration doesnot cure th initial defect atthe time of the insticution ofthe suit. The right course in such ¢ ease isto withdraw iy suit from the Coust, get the firm registered and then file afresh suit Effects of Non-registration (Sec. 69) 1. Suits between partners and firm. A person suing asa partner of an unvegistered fim cana sue the frm or any partners of the frm toenforeea right rising fiom a contractor conferedby the Partnership Act. He ean do sa if- (i) the firm is registered, and (i) the person sing is or his been shown inthe Register of Firms & a pariner in te fem (See. 9 (1). 2. Suite between firm and third parties, An unregistered fim cannot sue third paty 1 enforce 4 sight ising from a contact until) the firm is registred, and (i) te nares of the persens suing appear as partners in the Register of Firms [Sec. 69 (2)). Aplaint filed by an unregistered firm in contravention of Sec. 69 (1) and (2) is treated as avoid lint Abani Kanta Pal. nthe mater ofA1R. (1986) Cel. 43} Ths iew finds suppor fem 4 decision of the Supreme Cour in Loonkaran Serhia v. Juan E. John, A.LR. (1977) 8.0336. Ta Shreeram: Fisance Corp v Yasin Khem, ALR. (1989) S.C. 1769.1 suit by the appellants {parmers) was tic by the provisions of Sec. 69 2), as onthe date when te suit was filed, tvoo! the partners shown as parters as per elevant cats in the Register of Firms were notin ft, partners, one new parter bad come in and, two minors had been admatied to the benef of ‘the partersip fren regarding which no notice was given to the Registar of Firms, Thus, fe persons suing, namely the curent partners as on the date ofthe suit were not shown a pats in the Register of Firms. As such the suit was not maintainable in view of the provision of See. 69 2). 3. Claimofst-off Aa unregistered fm oraty pene thereof cannot claim a sctoffina proceeding instinuted against the fin by a third party 10 enforce a right arising frem a contrac, unt te registration of the firm is effected [Sec. 69 @)]. This ight of set-off, however is not affected if tne claim of seroff doesnot exceed 100 in vale (See. 69 (4) (2)] Non-tegistration, however, does not affect ~ eee te at a =e C- = ae dissolution of the firm, or for the accounts of the or for share of Property of the dissol firm: pret v. B.D. Karnatak, A.1.R. (1986) All, 32). rel Eee IG tees eager ity of a partner to sue disappears with the dissolutiot 4. The powers of an Official Assignee, Receiver or Court to realise the rroperty of an insolven! partner of an unregisteted firm, ree ne aes ee alge crease 6. The right of an unregistered firm to enforce a right ars is eles ‘enforce a right arising otherwise than out ofa contrac!a es eee ee Nature of Partnership 285, Ik should, however, be noted that a decree passed in a suit filed by an unregistered frm is not a nullity and where the plea of nor-registration is not raised inthe suit itself, it cannot be raised in a separate suit [Kalyan Sahai v, Firm Lachminarain, A.LR. (1951) Raj. 11, Alterations, I'any alteration relating to the following matters takes place in the case of a registered firm, a statement or intimation isto be sent to the Registrar of Ficms for incorporating the necessary change inthe Register of Firms (1) Change inthe name ofthe firm or in Iceation of the principal place of business of the registered firm (See. 60). @) Closing and opening of bearches (Sce. 61). (G) Change in names and addresses of parners (Sec. 62). (4) Change in the constitution of the firmand its dissolution or election ofa minor partner on ating ‘majority to continue as partner or sever his connection (Sec. 63. Penalty for false particulars (Sec. 70) I'any person supplies false or incomplete information to the ‘Registrar, or signs any statement containing fase or incomplete information tobe supplied to the Registra, he i punishable with imprisonment which may extend (0 wee montis, or with inc, ox wits exh. Inspection of Register of Firms and documents and grant of copies (Secs. 6and 67). The Register ‘of Firms shall be open to inspection by any person on payment of such fec as maybe preseribed [See. (66(1)]. Further all statements, notices and intimstions fled wih the Registrar shall be opea to inspection subject to prescribed conditions and payment of prescribed fees [Sec. 0 (2). The Registrar shall also, ‘on application, furish to any person on payment of the presiribed fee a certified copy of any entry in the Register of Firms (Sec. 67) Rules of evidence (See. 68). Any statement, notice or intimation recorded withthe Registrar by any person shal bes conclusive proof against him of any fact therein stated. The third parties can, howeves, challenge the fact of statement and prove that itis false and is based on misrepresentation or fraud, SUMMARY DEFINITION Parmership isthe relation between persons who have agreed wo share the profs ofabusines cari aller any of them ating forall See. 4). Characteristics of partnership. 1, Associatio of tvo or mere pemors. 2, Agreement: 3. Business 4 Sharing of profs ef the busines. S. Mul agen. firm mame. Perini who have entered ito partnership with one anotber ae called Partners fra ‘haan per nd coeninly om These dr hich sites sce ot eed he the name should noe ae a accor on oss andr 3) ranean se B To a nibs sw crib paca be Geren Lavofpernentpisan extension oth iv of Purmerip andre, anes ery an act ep atorship een eae. Ai ee et rac pars Procon santo hg sconce tg, rornatenoparteriip. snap in esecl ype ofcetoct A schallthe sent ements of a min ay be sae the tenets of paren wih he aaa na ting ond coset ee cet partaei Duran ofpariershp. panesipmay bf 3aedpertedot tine Whe prose nb Buran af para Auta. pameript wl Whe ese cone aoe earn fore nti cul ee Or unctling, W portclarprerip. onyChapter 5 ; OI | e 9 Relations of Partners i CHAPTER CONTENTS 1D Relations of Partners to One Another > Retirement of @ Parner (Ses. 2) © Rights of a Parner 9 Expulson ofa Parner (Sex 33) 2 Dulles ofa Partner > insolvency of a Parner (Sec. 34) 12 Property of the Fir (See. 14) 2 Death of a Parner (Sees. 5 and 42 (0) 2 Goodwill 9 Teanster ofa Parner Interest (Sec. 28) (© Agreement between Parners in Restart of | _o Righis and Durtes ot Parnes Ater a Change Trade in ho Conetititon ofthe Fira (See. 17) | Relations of Partners to Third Parties 9 Revocatien of Continuing Guarantee by ° Inplied Authority of @ Pastner {Chango in Firm (Sec. 38) > knpled Authority and Third Parties Summary 1 Wes of Partners | Obiectve Type: Questions © Miner Partner | Test Questons | Reconstitution ofa Fim | Practical Problems © nvoducton ef a Partner (See. 91) | RELATIONS OF PARTNERS TO ONE ANOTHER The relations ofthe partners of a firm to one another are usually governed by the sgreement among them, Such agreement may be expressed or may be implied from the course of dealings among them. I maybe varied by canseat ofall then, and sach congent may be expressed or may be implied bya course ‘of dealing (See. 11 (1)}. Whee there is no specific agreement or where the agreement is silent on a cert point, the relations of partners to one another as regards ther rights and dutesare governed by Sees. 91017 of the Partnership Act. Rights of aPartner 1. Righe to in business. The partnership agreement usually provides the mode of the cond ofthe Paine, bjt to any sich greet between te pre et) pre has aright to take part in the conduct of the business [Sec. 12 (a). This is based on the general Principle that parmership business 8 the common business ofall the partnts. But where a Darnes neglects or refuses to perform hs duties, and the burden of performing such dls for the conduas ofthe business falleon other partaes, the other partners have a righ:to compensation I&risinamacharierv. Sankara, (1921) A.C. 91)Law of Contract + Special Cortraci 290 2. Right to be eon.ulted. Every partner has an inherent right 10 be consulted in 21 matey affecting the business of the partership aa expres his views before any decision is taken by the partners Where theres any difference of opinion among the partner sto ordinary maters connect ‘withthe busines, it may be sete, subject to contact betweon the partners, bya majority of he parmers The majority of the partnes in exercising their power must actin yood fith, and before the matter is decided every parner must have expressed hs opinion. ithe partners se cyl divided those we orb the change must have thet Way. Buta to important matters concerrng the nature ofthe business no change may be effected without the consent ofall the pertnes {ec. 12 (0), Thus, for example, no change can be made in the nature of te business, nor cat the place ofthe business be changed nor the slo ofthe busines effected, unless all the partes agree tit 4. Right of access accounts, Subject to conract between the partners, every partner has’ ght to have access to and inspect and copy any of the books of the firm [Sec. 12d) A mine partner may have aceess to and inspect any ofthe accounts of the frm [See. 30(2)] bat not "vouks 4. Right to share to profits In the absence of any agresment, the partsers are enitd to shart. equal inthe profits eamedandare liable to contitute equally to the losses sustained by the fim (See. 13 (6)]. ‘5. Right tointerest on capital. The partnership agreement may contain a clause ast the ih the partners to elim interest on capital ata certain rate. Such intrest, subject to contract betwee the partners, is payable only cut of profits, if any, eared by the firm [Sec. 13 (c)]. 6. Right tointerest on advances. Where a partner makes, forthe purposes ofthe business of ht firm, any advance beyond the amount of capital he is entitled to interest on such advance atte rate of six percent per annum [Se 13 (d)], Such interest isnot only payable eu ofthe profit ofthe business but aso out ofthe assets ofthe fim. 7. Right to be indemnified. A partner has authriy, in an emergency, to do all such acts forthe purpose of protecting the fim from fxs aS would be done by a person of ordinary prudent ite Cot, atng under simi eeunstnes. Such as ofthe pane ind the fin ( 38a consequence of any such act, the partner incurs any lability or makes any payne hae has a right to be indemnified (Sec. 13 (c)} a ee ‘8. Right Co the use of partnership property, Subject to contract between the parners, the prope ‘ofthe firm must beheld and used by the partners exclusively forthe purposes of the business the firm. No partner has aright to teat it as hie individual property (Sec. 15). Ifa parner uses? Property ofthe frm dieetly or inrectly for hs private purpose, he must account to the firm ft the profits which ke may have eared by the use of that property. 9. Right of partner as agent of the firm. Every partner for the pu ness of he firm is - 1€ purposes of the business of eels non oft a Ge ain tothe provisions ofthe Indian Parnersip At inthe usual way, busines ofthe kind euced O° the firm. binds the firm (Sec. 19), pe fro He oni) 10. No new pariner to ' les pata tabe Reeiieed Brey nee has a right to prevent the introduction of a 3 sents to that or, unless there is an express term in the contract permitting such inuoduct fe Sear Aauoduction[Sec. 31 (I)}. This is because partnership is founded on mutual tust a 4M, No lab joining. A pes aaa papal ie i b Petson who is introduced as a partner into a firm is not Liable fo" ne, before he became a pariner [See. 31 (2),Relations of Partners 291 12, Right to retire, partes bas a right o retire (a) with the consent ofall he other parers, oF 0) macsordanes with an express sgresment beeen the partners, oF () where he partnership isat wll, by giving nove tall the ote partaers of his intention to retire [See.32 (1)} ight not tobe expelled. A partner has a right ao! to be expelled from the firm by any majerity ‘ofthe partners, save in the exercise in good faith of powers confered by the ontrct between the partners (See. 33 (D)) 14, Right of outgoing pariner to share in the subsequent profits, Where a partner has died or has ceased to bea partner by retirement, expulsion, insolveney, or any other caus, the surviving ‘oF continsng partners may cary on the business with the propery ofthe firm without any final setilement of accounts as between them. and the eulgoingparincr or his estate. In sucha cae, legal representative of the deceased partner or the outgoing partner, inthe absence ofa contract to the contrary, i entitled, a his option, to (6) ‘ach share of the profi as is proportionate to his share inthe propery ofthe firm, or (2) interest tthe rate of 6 percent per annum on the amount of bis share in he propety ofthe firm (See, 37) Duties of a Partner 13, Partnership is a contract of ubervimac fides. The paniners must act with utmost good faith as the very basis of partnership is mal taut and confidence, According to Sec 9, which deals withthe general duties, of partners, partners are bound — (a) to cay on the business of the firm tothe greatest common advantage, (6) tobe just and faithful to each other, and (©) to render true accounts and full information ofall things affecting the firm to any partner or his legal cepresentatve ‘The other duties are spread cer the Partnership Act, These dutis are summed up a under 1, To carry on business to the greatest comm the business of the firm to the greatest common advantage. He is bound, affecting the partnership, todo his bes in the common interest ofthe fim, other pariers any benefit which hemay have been able to obtain fomother people a the firm isin honour and conscience entitled t participate Example. B and C were patne's ina business as sugar retnors. Cwas autnorsed to Duy sugar forthe firm. He, without B's knowledge, supplied to the fm his own sugar at the ‘market pice. He had bough the sugar ala lower price and thus made a considerable prot Held, he must account tthe fim, forthe prot made |entayv. Craven (1853) 18 ea 75) «din which 2. To observe faith. Partnership isa fiduciary relation, Every partner must be just and faith, and observe utmest good faith wards every ether pane of he frm, Good faith equites ha he Shull not obuins private advange atthe expense ofthe Frm. He ix bound nal trmsactons tifecing the parmonhip todo his best in the common ines othe frm 3. Toinderamfy for fraud. Evry parnes is hound to inden the firm for any oss caused oi by his aad inte conduct ef the business ofthe firm. Ths isan absolute duty ofa pariner and a patrorean contact ams tof it(See, 10). The innoce partners fhe fur art,howerer, Table to rd panies fr he aud of any ofthe paren, Bu they can proeed totam damoaes agaist the parner who bas 2ommited the fra 4, Teattend digentiy Subj to contract between the parers, itis the dy of every partner 19 attend igenty ta his dais in the conduct ofthe busines ofthe firm [See 126) and to use his Koowledge and shill oth common advantage of al the prt.292 Law of Contract + Special Contracy 5, Not to claim remuneration. A partner isnot entitled to receive eny remuneration in any form for taking part in the conduct of the business of the firm. Its, however, ustal to allow seme remuneration to the working pariners provided there is a specific agreement to that effeg [Sec. 13 @1. ‘Where a pandanashin lady was a partner, it was held tha it was just and reasonable that some allowance must bemade to the other partners for the trouble they tcok in running the business of the firm [@ Krishna ¥. S. Mubhi, 16 C.W.N. 299], Similarly, where undue labour and ext trouble is imposed on one partner by another partner's wilful neglect of the business to whiche ‘ought to attend, he is entitled to compensation [Xrishnamachariar v. Sankara, (1921) APC. 91] 6. To share losses. It is the duty of every partner to contribute to the losses of the firm, Inthe ‘absence of an agreement tothe contrary, the pariners are bound to contribute equally to the lsss sustained by the firm [Sec. 13 (6].An agreement to share profits implies an agreement to share losses also 7, To indemnify for wilful neglect. Every partner is, subject to contract between the paren, bound to indemnity the frm for any loss caused to it by his wilful neglect in the conduct ofthe business ofthe firm [See. 13 (6]. The firm is, however, liable tothe third persons for the wilfd neglect or fraud of any of the partners. 8. Tohold and use property of the firm exclusively for the firm. Itis the duty of every pare ‘of the firm to hold and use the property of the fitm exclusively for the purposes ofthe busines! of the frm. The partners may agree differently but, in such a case, there should be a specie agreement to that effect (Sec. 15). 9. To account for personal profits. Ifa partner derives any benefit, without the consent of he Examples ow Lienert = i em eat tn Cartan é [Feaberstonnaugh v. Fenwick, (1810) 17 Ves. 298}. Bab Pee reiae aoe ies miness: A partner must not carry on any business of the ce sci waa emt es ay to the firm all profits made by him in that businese i ‘ pei rpkelanrc, siness. This is, however, subject to contract parrers na busnss wich ‘government. Sudsequenity itis found ou ee ‘en othe same gaara ‘ia bound wo aceounito Ga yeq) “Unto Me fm or the pots so made by him [Lachv. Lynam, (1054) 4Relations of Partners 293 1M, To act within authority. Every partner is bound to act within the seope of his actual or implied authority [See. 19 (1)]. Where he exceeds the authority conferred on him and the firm suffers 2 loss, he shall have to compensate the firm for any such los. 12, To beliable jointly and severally, Every partners liable, jointly wit all the othe partners and also severally, fr all the ats of the firm done while be is a pariner (Sec. 25). An ‘act ofa firm’ means any actor omission by all the partners, oc by any partner or agent o the firm which gives rise toa right enforceable by or agains the firm (See. 2(a]. Any other at or omission is not covered by the term ‘act of a fim’ 13, Not to assign his rights. partner cannot assign his rights and interest in the firm to an outsider sos to make him the partner of the firm, He can, however, assign his share ofthe profitand his share inthe assets ofthe fim (See. 29), PROPERTY OF THE FIRM (SEC. 14) ‘tis open to partners to determine by agreement amongst them ato what shall be the property ofthe firm and what shall be the separate property of one or more of the partners. I there it no express agreement, the source from which the property was obtained, the purpose for which it was acquired and the mode in which it iad been deat with, are imporant in determining as to whether the property is or isnot the property of the firm. Sec. 14 provides that the property of the firm in the absence of a contract tothe contrary, includes ~ (1) all property originally brought into the common stock of the firm; (2) all rights or interests inthe propery. originally so brought: 3 (3) all property acquired, by purchase or olherwise, by or forthe frm, and all rights ad interes in any property so acquired; i (4) all property acquired forthe purpose and inthe course of the business of the fim, end ll rights and interests in any propzrty so acquired; and (5) goodwill of the busincss of the frm (See. 14, para 1), ‘This list of propery isnot exhaustive. Inshor, whatever atthe commencement ofa parinershi i thrown into the common stock, and whatever has from time to time during the continuance ofthe partnership beenadded thereto or obtained by means thereof, whether relly by purchase or indirectly, belongs tothe frm, unless the coniary can be shown, ‘See. 14 further provides that, unless the contrary intention appears, property and ightsand interests in property acquired with money belonging to the firmare deemed to have been acquired forthe frm (Sec. 14; para 2). Examples (a) A, Band Care porters ina busines. They bay a property nthe ramo ata ftiious ‘arson wih the moneys ofthe parnership. The propery is partnership propery (0) Mana Bare parto's a business, A buye some land in Ne own namo ou of ho profs ofthe partnership busness. The landis partnership propery. (a em anner farm, buys shares of @ company in his own nam, without the ‘pamcrty ofthe other partners, but wit tho maney and on account of ho fir. The shares are partnership property. ‘Sometimes, the private property of« partner may be use for the purposes ofthe business ofthe finn, tn such a case it does not become partnership property merely because i is being used forthe purpose ofthe business of the firm. It becomes the property ofthe frm only if the parters show an intention to make it 20 [BLN. Murthy & Sone v. VV. Soguna, AAR. (1978) A257],294 Law of Controct * Special Contract Goodwill ‘The property of a firm, in the absen business (See. 14]. The term ‘goodwill rather than a legal term, Its the value of time due to its integrity, efficient service to the customers, ‘reputation enables the firm to ear more than the normal profits Faanaendty the Supreme Courthat goodvill ian tangible ase of fim if the whole advan aeensartinay be, ofthe reputation and connections formed with the customers eter with the hate es i yreh make the connections rable [Khushal Khemgarv. Khorshed Bann, ALR (1970) S.C. 1147] ‘Goodwill has no meaning except in connectio ‘ofa contract to the contrary, includes the goodwill of the vt defined in the Act. Iti, properly speaking, a commercial the reputation and connections whieh the frm establishes ver ‘quality of its products, industry, et. This ‘earned by the business asa whole. Its wn with a continuing tusiness. In Trego v. Hunt, (1896) A.C 7, i was decribed as the advantage which is acquired by abusiness, beyond ts nee oie ibe canta stock, fund or property employed therein, in consequence of the general pute Jatronage and encouragement which it receives from constant or” habitual customer. goodwill arene t depend on the nature and character ofthe business o which its attached. It is composed Mia warty ofelements and is bound to fer in its composition in diffrent trades and in diffe sicincrees inthe sume tade. One element may preponderate in one business and another in anothe business. rr ally speaking, goodwill means much more than the probability that the old customers wil resort tothe old place {Cru well. Lye (1810) 17 Ves. 346]. Often, it haprens that the goodwill ‘Sp and life ofthe busines, wihout which the business would yield litle or no fru. Is the whe Rantage, whatever it may be, ofthe reputation and connections of the frm, which may have Best Jt up by years of honest work or gained by lavish expenditure of money. In other words, itmesns caee atmative advantage tat has been acquired in carrying on the bisness, whether cometied Ar the premises of the business or is name or style and also its business connections, its business prestige and its severl other intgible advantages which a business may Inve acquired [New Giorat Cotton Mills Lid v. Appellate Tribunal, ALR. (1957) Born. 11]. Agreement between Partnersin Restraint of Trade According to See. 27 ofthe Indian Contract Act, every agreement by which anyone is restrained fom eeeising:a lawful profession, trade or business of ary kind is, o that extext, void. But the parters of Sin may agree thata partner shall not carry on any business other than that of the firm while he fs 2 partner [See. 11 (2)]. The reason for this may be found in Sec. 9 which provides thatthe partners 3 Found to carry on the business of the firm o the greatest common advantage: It implies that a pate reset not exrry on a business which competes with or is at variance with o: adverse to the busitess of {terest ofthe firm, Ifa partner carries on any business of the same nature,as and competing with that rhe firm, he has to account for and pay tthe firm all profits made by him in that business [See | (oy) Buta partner can carry on such a business with the consent ofthe other partners Exceptions to the general rle that an agreement in estraint of trade is void under the Partnership Act HA pee aa cc business other than tha ofthe firm while he is a partner (See: "1 2, An outgoing partner may agree with his partners not to cary ona by firm within a specified period or within specified loeal limits [Sec. 35 2)] 3. Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that som forall of them will not carry on a business similar to that ofthe firm within a specified peviod within specified loca limiis (See, 54) Jess simnitar to thar of theRelations of Partners 295 ‘4. Where the goodwillofa firm is sold after dissolution, a partner may carry on a business competing with that of the buyer and he moy 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 ofthe finn, or (c) solicit custom of persons who were dealing withthe firm before its dissolution (Sec. $5 (2)]. ‘Any partner may, upon the sale of goodwill of firm, male an agreement with the buyer that such frriner will not carry on any business similar to that ofthe firm within a specified perioe or ‘within specified local limits (See. $$ (3)} Incases (2), (3) and (5), the Courts will enforce such agreements only ifthe restrictions imposed are reasonable RELATIONS OF PARTNERS TO THIRD PARTIES Every partner isthe agent of the firm forthe purposes ofthe business of the fim (Sec. 18). He can act on behalf ofthe firm and bind the firm provided (a) he does the act for earrying on, inthe usual way, ‘susness of the kind carried on by the firm, and (b) the act is done in he name of the firm. {Implied Authority of a Partner The authority ofa partner means the capacity ofa partner to bind the firm by his act. This authority may ‘be express or implied. Where the authority toa partner to acti expressly conferred by an agreement, t {sealled express authorin, But where theteis no partnership agreement or where the agreement isileat. “the act of a partner which is done to carry on, inthe usual way, business ofthe kind earried on by the firm, binds the firm” [See. 19 (1). This authority of a parter to bind the firm is called his implied ‘authority. flows from ihe legal relations of the partners and is founded onthe principle of agency. tis subject tothe fllowing conditions |. The act done by the partner must relate to the normal or usual business of the firm. If for ‘example, a partner ofa firm dealing in books places an order for a certain quantity of wine inthe ame of te firm, the firm would riot be liable ‘The act must be such as is dane within the scope of the business ofthe frm in the usual w. § difficult to lay down any foolproof rules as to what the usual way of carrying on the busin ‘5 1twill depend on the nature and circumstances of eich particular cass, 3 The act must be done inthe name of the fim, or in any other manner expressing or implying an ihtention to bind the firm (Sec. 22) Examples (@) ‘and Bearry on business hn partnership as bonkers. A sum of manoy is recsived by ‘Aon penal ofthe tem. B d9¢s not know ofthe receipt. A approptates the money bis own use. The partnership is lable to make good the money, bocause recog ot ‘money by Aisin the usual course of business. (©) 4.2 parnor in a fm of solctors, brows money and executes a promissory roto in the name of frm witout authoiy Th cher parnersare not abe on honk or sna pea ‘ofthe oxinary business of solr to craw, acopt or indorse negotableinstnarence (0) Aand Bare partner, A withthe inteiion af cheating 8, gous toa sop and puree y certain artes on behalf ofthe firm, suchas might be used inthe ordinary source ot {he partnership business, and converts ther to his private uso, there boing te Collusion between him and the seller. The firm I kabl for the pr ‘goods. ASS pin the imped authority ofa paring: ns taling fim, afm which depend or ‘eter onthe buying and seling of goods, the implcd authority ofa partner hae bene ea — ee utLaw of Contract * Special Conroy (jy prchasng goods, on behalf ofthe firm, in which the fim deals or which ace employed ing, fi’ business; (2) selling the goods ofthe firm ; {3) receiving payment ofthe debts de tothe firm and giving receipt for them ; (4) settling accounts with the persons dealing with the firm 'S) engaging servants for the partnership business ; 6) borrowing money on the credit ofthe firm; 7) drawing, accepting, indorsing bills and other negotiable instruments in the name ofthe fms '8) pledging any goods ofthe firm forthe purpose of borrowing money; and 19) employing a solicitor to defend an action against he firm for goods supplied. [No implied authority, In the absence of any usage or custom of trade ‘o the contrary, the inp shority ofa partner does not empower him to (a) submit a dispute relating to the business ofthe firm to arbitration ; (6) open a banking account on behalf ofthe finm in his own name ; ic) compromise ot relinquish any claim or portion ofa claim by the firm, (2) withdraw a suit or proceeding filed on behalf ofthe fin (e) admit any ibility ina suitor proceeding seains the firm; VP) acquire immovable property on behalf of the firm ; (@) ‘transfer immovable property belonging to the firm, or (enter imo partnership on behalf ofthe fim [Sec, 19 (2)). partner can do the above acts if i) he has specific or express authority from the partners ; oF (@) the usage oe custom of trade permits him. Alle partners of firm can raify act of partner which has been dane by him in excosscf tt inplied authority or without any authority, provided the ati such as coud be legally done with Se sushority of ll the partners previculy given and thatthe partners ratify the at with fll knowledge the facts (5.1. Soni ¥. Fanwfiq Farooki, A.LR. (1976) Delhi]. Such ratification can be proved by Oe conduct ofthe pertnrs [Luca Ram Ved Parkash Mls Maharani of India, ALR. (1989 Delhi 16 Partner's authority in an emergeney (See. 21). A (partnor has author, in ioe has authority, in an emergeney ceain acts provided (0) they are done to protect the firm from los, and (i) the partner acs 352 pralent person would act ueder similar circumstances in his own case. Such ats bind the fim bat © ‘ot form par ofthe pariners implied author. Example. A parr, eceves goods at Kolkata for bing eon toa purchasoe at Cute A may sl iho goede Kelis, i hey wil nt bea! te Journey to Cutack wow Implied Authority and Third Parties 1 Extension and restriction of « partner's implied sy 8 e's imped authority (See, 20). The partners ina wy by contact betwee tem, extend or resi! the impli authriy of any parae.S 4 thd panty is concern, the Fm continuo ob lible ohm fr any such act wich HE ‘wishin the scope ofthe implied authority: of a partner unless the person with whom the parte eng ier nows tats patra iid or no arty or os at fo artnet bea parm. The third party is also not affected by a seeretesteetion ofthe if Suthorty of parte ones hustle — A ie ee)