Indian Partnership Act 1932

Home Work – 1

Q-1 A and B were two partners in a firm of sugar dealers. Unknown to B, A supplies at a
particular time his own stock of sugar to the firm at market price and makes profit.
Can he personally keep this profit?
Ans-1
Provision:
Subject to contract between the partners,
(a) If a partner derives any profit for himself from any transaction of the firm, or from the
use of the property or business connection of the firm or the firm name, he shall
account for that profit and pay it to the firm;
(b) If a partner carries on any business of the same nature as and competing with that of
the firm, he shall account for and pay to the firm all profits made by him in that
business.

Fact of case:
In the given case, A made a personal profit by supplying own stock of sugar to the firm at
market price and made personal profit. And these are the same goods in which firm deals,
so it is considered as personal profit earned by partner from competing activity.

Conclusion:
Considering above provision and fact of the case, it may be concluded that A cannot keep
personal profit earned by him.

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Q-2 A and B, co owners of a house, let it to a paying guest. They divide the net rents
between them. Are they partners?
Ans-2
Provision:
The sharing of profits or of gross returns arising from property by persons holding ajoint or
common interest in that property does not of itself make such persons partners.As
discussed earlier, sharing of profit is an essential element to constitute a partnership. But, it
is only prima facie evidence and not conclusive evidence, in that regard.

Fact of case:
In the given question A and B are dividing net rents between them by letting a house on
rent to paying guest, which is not sufficient to determine partnership between them.

Conclusion:
Considering above provision and fact of case, it may be concluded that A and B are not
partners but just co-owners of a house

Q-3 X,Y and Z carry on business on partnership basis. A to whom they sent goods for sale
on commission basis, secretly allows Z a share in the commission, which he receives in
consideration of Z’s using his influence to send goods to him. X and Y come to know of
the secret deal of Z. X and Y ask Z to account for the commission and share it with
them, but Z refuses. Decide.
Ans-3:
Provision:
Subject to contract between the partners,
(a) If a partner derives any profit for himself from any transaction of the firm, or from the
use of the property or business connection of the firm or the firm name, he shall
account for that profit and pay it to the firm;
(b) If a partner carries on any business of the same nature as and competing with that of
the firm, he shall account for and pay to the firm all profits made by him in that
business.

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 Fact of case:
In the given case, Z is earning commission from A by using his influence to send more goods
to A from firm, so it indicates secret profit earned by partner using firm’s properties.

Conclusion:
Considering above provision and fact of the case, it may be concluded that Z has to account
for the commission earned by him to firm.

Q-4 D, J and A are only partners in a firm. They decide to dissolve the partnership with
effect from 1st April,1988. The partners do not give a public notice of the dissolution,
but continue the business. During the course of business, D, J and A endorse certain
Bills of Exchange of the partnership to a third party M, who was not aware of the
dissolution. M, the third party, had supplied certain stationery to the firm. The Bills of
Exchange are dishonoured. The third party M wants to claim the money.
Decide: Whether the firm will be liable to pay for the bills of exchange?
Ans – 4
Provision:
Partners continue to be liable as such to third parties for any act done by any of them which
would have been an act of the firm if done before the dissolution, until public notice is
given of the dissolution:
Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a
partner who, not having been known to the person dealing with the firm to be a partner,
retires from the firm, is not liable under this section for acts done after the date on which
he ceases to be a partner.
(1) Notices under sub section (2) may be given by any partner

Fact of the case:

In the given case, the firm was dissolved by partners on 1 st April 1988 without giving public
notice, So third party M supplied certain stationery items to firm against Bill of Exchange
which was dishonoured. Here, M was not aware about dissolution of firm.

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 Conclusion:
Considering above provision and fact of case, it may be concluded that firm will be liable to
pay to M on dishonor of bill of exchange.

Q-5 A, B and C are partners in a firm called ABC. A, with the intention of deceiving D, a
supplier of office stationery, buys certain stationery on behalf of the ABC firm. The
stationery is of use in the ordinary course of the firm’s business. A does not give the
stationery to the firm, instead brings it to his own use. The supplier D, who is unaware
of the private use of stationery by A, claims the price from the firm. The firm refuses to
pay for the price, on the ground that the stationery was never received by it. Decide:
Whether the firm’s contention is tenable?
Ans-5
Provision:
a partner acting within his apparent authority receives money or property from a third
party and misapplies it, or a firm in the course of its business receives money or property
from a third party, and the money or property is misapplied by any of the partners while it
is in the custody of the firm, the firm is liable to make good the loss.

Fact of case:
In the given case, A bought certain stationery from D on behalf of firm which is in ordinary
use of office of firm, however A did not give stationery to firm but used it for personal
purpose. Here, the act done by A was within his implied authority and it was in ordinary
course of business of firm.

Conclusion:
Considering above provisions and fact of case, it may be concluded that firm’s contention
about not paying price of stationery to D as firm did not receive stationery items is not
tenable.

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Q-6 Ram and Kishan were partners in a business as suppliers of leather goods and they
were regular contractors to the Government. Kishan, without the knowledge of
Ram, supplied to the Government certain leather goods in which the firm was also
dealing and made substantial profits. Can Ram claim the profit earned by Kishan?
Explain.
Ans-6
Provision:
Subject to contract between the partners,
(a) If a partner derives any profit for himself from any transaction of the firm, or from
the use of the property or business connection of the firm or the firm name, he shall
account for that profit and pay it to the firm;
(b) If a partner carries on any business of the same nature as and competing with that of
the firm, he shall account for and pay to the firm all profits made by him in that
business.

Fact of case:
In the given case, Ram and Kishan were partners in a business of supplying leather goods.
Kishan supplied leather goods to Government without knowledge of Ram and made
substantial profit, which indicates earning personal profit from competing activity.

Conclusion:
Considering above provision and fact of case, it may be concluded that Ram can claim profit
earned by Kishan.

Q-7 A and B are partners in a firm dealing in cloth. A placed an order in the firm’s name
and on the firm’sletter pad for five bags of wheat to be supplied at his residence. Is
the firm liable to pay the price of wheat?
Ans-7
Provision:
The partners are jointly and severally responsible to third parties for all acts which come
under the scope of their express or implied authority. This is because that all the acts done
within the scope of authority are the acts done towards the business of the firm. The
expression ‘ act of firm’ con notes any act or omission by all the partners or by any partner
or agent of the firm, which gives rise to a right enforceable by or against the firm. Again in
order to bring a case under Section 25, it is necessary that the act of the firm, in respect of
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 which liability is brought to been forced against a party, must have been done while he was
a partner

Fact of case:
In the given case, the firm is dealing in cloth while A bought what in the firm name to be
delivered at his residence, it indicates the act is not within A’s authority

Conclusion:
Considering above provision and fact of case, it may be concluded that firm is not liable to
pay for wheat.

Q-8 A and B were partners in a firm dealing in purchase and sale of cloth. B started cloth
manufacturing business individually. Can A ask B to share the profits of cloth
manufacturing business with him?
Ans-8
Provision:
Subject to contract between the partners,
(a) If a partner derives any profit for himself from any transaction of the firm, or from the
use of the property or business connection of the firm or the firm name, he shall
account for that profit and pay it to the firm;
(b) If a partner carries on any business of the same nature as and competing with that of
the firm, he shall account for and pay to the firm all profits made by him in that
business.

Fact of case:
In the given case, A and B are in partnership dealing in purchase and sale of cloth, while B
has started cloth manufacturing business individually, which is not competing with firm.

Conclusion:
Considering above provision and fact of case, it may be concluded that A can not ask B to
share profit of cloth manufacturing business with him.

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Q-9 A, B and C are partners of an unregistered firm. D owes this firm 1,000 on a contract.
The firm files a suit against D. The suit is dismissed for non registration of the firm. The
firm is registered later on. Can the firm now successfully bring the suit against D?
Ans-9
PROVISION:
The firm or any other person on its behalf cannot bring an action against the third party for
breach of contract entered into by the firm, unless the firm is registered and the persons
suing are or have been shown in the register of firms as partners in the firm. In other words,
a registered firm can only le a suit against a third party and the persons suing have been in
the register of firms as partners in the firm.

Fact of case:
Firm’s case was firstly disallowed as it was unregistered but later on firm got registered and
then suit was filed against D for sum of Rs.1000. here, the firm is registered at the time of
fresh suit.

Conclusion:
Considering above provision and fact of case, it may be concluded that firm can successfully
bring suit against D.

Q-10 A, B and C were partners in a share broker’s firm. X, a customer of the firm, delivered
certain securities to the firm for sale. A and B sold away the securities without the
knowledge of C and misappropriated the money. Who will be held liable to X for the
payment of the price of securities?
Ans-10
Provision:
a partner acting within his apparent authority receives money or property from a third
party and misapplies it, or a firm in the course of its business receives money or property
from a third party, and the money or property is misapplied by any of the partners while it
is in the custody of the firm, the firm is liable to make good the loss.

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Fact of case:
In the given case, A and B sold securities given by customer X without knowledge of C and
misappropriated the money. However, the act of selling securities is within apparent
authority of partners.

Conclusion:
Considering above provision and fact of case, it may be concluded that whole firm will be
liable to pay price of securities to X.

Q-11 A and B purchased a taxi to ply in partnership. They plied the taxi for a year when A,
without the consent of B, disposed of the taxi. B brought an action to recover his
share in the sale proceeds. A resisted B’s claim on the ground that the firm was not
registered. Will B succeed in his claim?
Ans-11
Provision:
Non registration of a firm does not effect the following rights:
1. The right of third parties to sue the firm or any partner.
2. The right of partners to sue for the dissolution of the firm or for the settlement of the
accounts of a dissolved firm, or for realization of the property of a dissolved firm.
3. The power of an Official Assignees, Receiver of Court to release the property of the
insolvent partner and to bring an action.
4. The right to sue or claim a set off if the value of suit does not exceed 100 in value.

Fact of case:
In the given case, sale of taxi by A put the firm to an end, so it indicates dissolution of firm
and B wish to claim his share of sale proceed from A.

Conclusion :
Considering above provision and fact of case, it may be concluded that B will succeed in his
claim to get his share of sale proceed from A.

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Q-12 Kumar, Kishore and Krishna are partners in a business. Kumar is entitled, according to
the terms of the Partnership deed, to 3/8 th of the partnership property and profits.
Kumar retires from the firm. Kishore and Krishna continue the business under the
name of the firm, without paying out the share of Kumarin the assets of the firm or
settling account with Kumar. Is Kumar entitled to any profits of the firm made after the
date of his retirement?
Decide stating the provisions of the Indian Partnership Act in this regard.
Ans-12
Provision:
A Partner is entitled to receive either Interest @6% p.a. on outstanding balance of retiring
partner Or his share of profit for all future profit earned by firm after his retirement until
the outstanding balance is settled. The choice between interest or profit sharing remains
with retiring partner.

Fact of case:
In the given case, Kumar has retired from firm and remaining partners have continued
business in firm name without settling Kumar’s claim.

Conclusion:
Considering above provision and fact of case, it may be concluded that Kumar is entitled to
profit of the firm made after his retirement until his claim is settled by partners.

Q-13 ‘A’is a publisher; he agrees to publish at his own expense a book written by ‘B’and to
pay ‘B’half of the net profits. Does this create a relationship of partnership between A
and B? Give reasons.
Ans-13
Provision:
Sharing of profit is Prima facie evidence of existence of partnership while Mutual agency is
conclusive evidence of existence of partnership. To check existence of partnership between
persons, profit sharing is not only sufficient, Mutual agency is cardinal principle of law and
very helpful in reaching conclusion about existence of partnership.

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Fact of case:
In the given case, A is publisher of book. He bears all expenses and only half of profit is
shared with B. The facts are not sufficient to determine existence of partnership. Mutual
agency element needs to be verified for existence of partnership which seems missing in
the case.

Conclusion:
Considering above provision and fact of case, it may be concluded that there is no
partnership relation between A and B.

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