THE INDIAN PARTNERSHIP ACT, 1932

 Assent:- 8th April, 1932

 Enforcement date:- 1st October, 1932 (Except Section 69 which shall come into force on 1st October 1933)
 Sections:- 74
 Chapter:- 8
An act to define and amend the law relating to partnership
1. Short title, extent and commencement:-
 This may be called the Indian Partnership Act, 1932.
 It extend to the whole of India (The words “except the state of Jammu and Kashmir” omitted by
the Jammu and Kashmir Reorganisation Act, 2019 (34 of 2019), Ss 95 and 96, Schedule Fifth,
Table 1 (w.e.f. 31-10-2019)
 This act has been enforced in two steps.

2. Definitions:-
 A partnership is a type of business structure in which two or more individual or entities, expressly
or impliedly with mutual consent come together to do a business in jointly for the profits.
 In partnership each partner shares profits and losses in pre-determined ratio and each partner is
personally liable for the acts, debts, obligations and any other activities of the partnership.
 Partnership can be formed for the fixed period of time or for doing some specific project.
Illustartion:- A and B decided to make profits by Importing the cheap toys from china and sell them
in Indian market at higher price. For this they form a firm A & B Toys. Here they do business in
jointly under the name of the firm A & B Toys and also they are sharing the profits and losses, so
this is called partnership.
3. Application of provisions of Act 9 of 1872

4. Definition of “Partnership”, “Partner”, “Firm” and “Firm name”:-

 Partnership is a relation between the two or more persons for doing a business carried by all or any
of them acting for all in jointly for the profits.
 Persons who is in the partnership is known as the individual Partners.
 Partners in whole known as firm.
 Under the name of the firm in which business is carried out known as the Firm name.
Cases:- (i) Helper Girdhari Bhai V. Syad M. Kadri & others 1987

5. Partnership is not created by status:-

 The relation between the partners is not arise by status it is created by contract.
 Hindu Undivided Family members cannot be a partners in their family business.
 Burmese husband and wife cannot be a partners in any business in which they are invovlved.
Cases:- (i) Commissioner of Income-tax, Madras V. Bhagya Lakshmi 1965 S.C.J. 1708 it has been
decided that an agreement is an essential element of partnership.
 (ii) Nonchand V. Gangaram Shethji, AIR 1976 SC 835, it has been decided that partnership is arises from
a contract and not from status.
6. Mode of determining existence of partnership:- Inspection of all relevant fact taken together which is
insure that the group of persons is or is not a firm, or whether a person is or is not a partner in a firm.
Relevant facts which determine the partnership:-
1. Intent:- The partners must be intend to carry a business in joint.
2. Agreement:- There must be an agreement either oral or written with the consent of the partners
outlining the terms and conditions of the firm.
3. Contribution:- Each partner must be contribute something to the partnership, whether it can be
money, property, services or anything else.
4. Joint control:- The partners must have joint control over the business and decision making.
5. Sharing of profits and losses:- The partners must share the profits and losses of the business.
6. Mutual agency:- Each partner must have the authority to act on behalf of the partnership and bind
it to contracts and agreements.
Any person who receive share in profit, does not itself make him a partner with the partner
carrying on the business.
Case:- Cox V. Hickman, (1860) 8 HLC 268, it has been said that to determine the existence of a
partnership, it is necessary to have regard to the real relation between the parties.
7. Partnership at will:- Partnership at will is a type of partnership where there is no specific term or
duration for the partnership. It can be dissolved by any partner at any time without any reason. In this
type of partnership there is no agreement related to the duration of the partnership.
Case:- Ramesh Kumar V. Smt. Lata Devi, AIR 2007 MP 153, the High Court of Madhya Pradesh has laid
down that where intention of the parties from the partnership deed appears that there shall be no
determination of a partnership firm even on the death or retirement of any partner, the firm shall be
called as partnership at will.

8. Particular partnership:- Particular partnership is a partnership in which firm is created for some
particular duration of time or for some particular business or purpose. After completion of particular
time or purpose or business the partnership came to an end. All the terms related to the particular
purpose or time written in the deed.
Case:- Seth Sugnamal V. Umrao Bai, AIR 1938 Nagpur 550, it has been laid down that for a particular
partnership, all the three elements are indispensable which are necessary for a general partnership
under Section 4 of the Act.

9. General duties of partners:-

i. They should carry a business to the greatest advantage of the firm.
ii. They should be loyal and faithful to each other.
iii. They should share all the information with each other which is directly or indirectly affect the
business of the firm.
iv. They should render full accounts and full information of other things to any partners or his legal
representative.
 10. Duty to indemnify loss caused by fraud:- Every partner shall indemnify the firm for any loss caused to
it by his fraud in the conduct of the business of the firm.

11. Determination of rights and duties of partners by contract between the partners:-
(1)The mutual rights and duties of the partners of a firm may be determined by the contract between
the partners, and such contact may be express or implied by course of dealing.
The contract usually includes provisions related to capital contributions, profits and loss sharing,
decision- making authority, management responsibilities, record-keeping requirements, fiduciary
duties, loyalty obligations, good faith requirements, confidentiality obligations, and cooperation
expectations. The partnership agreement may also include provisions related to the admission of new
partners, the withdrawal or expulsion of existing partners, and the dissolution of the partners. It is
important for partners to carefully review and negotiate the terms of the partnership agreement
before signing it, as it will govern their rights and duties throughout the life of the partnership.
(2) Agreement in restraints of trade:- A partner shall not carry on any business other than that of the
firm while he is a partner.

12. The conduct of the business:- Subject to the contract between the parties:-
a) Every partner has a right to take part in the conduct of the business
b) Every partner is bound to attend diligently to his duty in the conduct of the business
c) Any difference arising as to ordinary matters connected with the business may be decided by
the majority of the partners,
And every partner shall have the right to express his opinion before the matter is decided,
But no change may be made in the nature of the business without the consent of all the
partners
d) Every partner has a right to have access to and to inspect and copy and of the books of the firm.
A mere reading of Section 12 (c) makes it clear only that majority decision can apply only in
respect of ordinary matters of the conduct of business. A majority of partners is not entitled to
decision on important matters to make them binding on other partners.
Case:- Suresh Kumar V. Amrit Kaur, AIR 1982 Delhi 131

13. Mutual rights and liabilities:- The Indian Partnership Act, 1932, governs the law of partnership in India.
It defines the mutual rights and liabilities of partners in a partnership firm. Below are the key
provisions regarding the mutual rights and liabilities of partners under this act:
14. The property of the firm:-
I. Mutual Rights:
a. Right to Share Profits and Losses: Every partner is entitled to share the profits and contribute to the
losses of the firm in the absence of a partnership deed specifying otherwise.
b. Right to Take Part in Management: Each partner has the right to participate in the management and
conduct of the business unless there is an agreement to the contrary.
c. Right to Access Books: Partners have the right to access and inspect the books of accounts of the firm.
d. Right to be compensated for Extra Work: A partner who performs extra work for the firm is entitled to
receive extra remuneration unless the partnership deed states otherwise.
e. Right to Be Indemnified: Partners have the right to be indemnified by the firm for expenses incurred in
the ordinary course of business.
 f. Right to Continue as a Partner: Unless there is a contrary agreement, a partner has the right to continue
as a partner in the firm.
g. Right to Dissolution: If a partner wishes to dissolve the firm, they can do so with the consent of all the
other partners.
h. Right to Account: Every partner is entitled to an account of the partnership's dealings.
II. Mutual Liabilities:
a. Liability for Debts: Each partner is jointly and severally liable for the debts and obligations of the firm.
This means that a creditor can sue any or all of the partners to recover the firm's debts.
b. Liability for Wrongful Acts: Partners are also jointly and severally liable for any wrongful acts or
omissions committed by any partner while acting in the ordinary course of the firm's business.
c. Liability for Misapplication of Property: Partners are jointly and severally liable for any loss caused to the
firm by the misapplication of money or property belonging to the firm.
d. Liability to Render True Accounts: Partners are obligated to render true accounts and full information of
all things affecting the firm to any partner or his legal representative.
e. Liability to Share Profits and Losses: Partners are obligated to share the profits and contribute to the
losses of the firm as per the terms of the partnership deed or the provisions of the Indian Partnership Act.
It's important to note that the mutual rights and liabilities of partners can be varied by a partnership
deed, but any terms in the deed must not be in contravention of the provisions of the Indian
Partnership Act. The Act serves as the default framework for partnership rights and liabilities when a
partnership deed is silent on certain aspects