Indian Partnership Act, 1932 : an overview


A partnership is defined by the Indian Partnership Act, 1932 as an arrangement between two or more individuals who intended to share the proceeds of a company run by both or by one or more individuals working for all of them. It is defined in section 4 of the Act. It may be either oral or written.  In Tarsem Singh v. Sukhminder Singh[1], the supreme court held that according to the law it is not mandatory that any contract be in writing.  Based on an oral agreement there can be an equally binding contract between the parties, whether there is statute requiring the agreement to be in writing. A relationship arrangement may be concluded between parties that are contractually qualified.

A partnership may be joined by any person who is of the age of majority according to the law to which he is subject and who is of sound mind and is not excluded from contracting by any law to which he is subject. As a partnership deed, the formal document is known[2].

Section 12[3] of the Act specifies that a relationship must be formed for carrying on a company of a lawful nature. The relationship does not require co-ownership of property. The deal is to divide profits and liabilities with the parties. The allocation of benefit and expenses will be based on or equal to the ratio of the resources contributed. If the relationship suffers damages, it tends to spread the responsibility among the partners. All the partners ae equally responsible for paying the firm’s debts. The obligation is infinite, which means that the private properties of the partner will be disposed to repay the company’s debts.  The obligation is infinite, which means that the private properties of the partners will be disposed of to repay the company’s debts. When the partners have set the length of the relationship firm, so the partnership expires after the expiry of the fixed terms. It becomes a relationship at will as the couples intended to proceed with the partnership rights after the expiry of the fixed term. It is not mandatory for all partners to be the same or for all partners to engage in the conduct of the business or to share gains or losses equally. The partner is called partners it. based on the type of work, the level of obligation, etc. the spouse is graded. There are essentially six partner types.

Active/ Managing partner: the partner who engages in the regular conduct of the group. An ostensible companion called this partner.

Sleeping/Dormant: he does not engage in the company’s action, but he is bound by all the partners conduct.

Nominal Partner: he is a partner in the firm by name only. In fact, he does not have any actual or substantial interest in the business.

Profit partner only: the partner who agrees to split the profit but experiences no damages. In the event of dealing with a third party, he is not responsible under any commitments.

Minor partner: under the act, a minor should not be a partner, but he can an able to take advantage of the permission granted by all the partners. His benefit will be divided evenly, but in the event of the company’s failure, his responsibility will be reduced.

Partner by estoppel: It means that the individual is not a partner, but he has represented himself by actions or words to another person to be the partner, then afterwards he will not refuse. Even though he is not a partner, but he becomes the partner by holding out or by estoppel. Only an understanding between separate people is all you need for the formation of a relationship.

A lot of bureaucratic formalities must be passed before a business is formed in the case of a partnership. The partners are their own masters to control their business. A corporation is subject to a lot of regulatory regulation. A single partnership arrangement is necessary for the termination of the partnership. But this is not the case with a company that can only be wound up if a certain series of protocols are met. Because all the gains are to be pocketed by the partner of a collaboration company, there is a tremendous opportunity for the partners to excel in business, but that is not the case for a company. The people who have entered a relationship are considered partners separately and a corporation collectively. There is no distinct legal identity in a relationship firm. A corporation is a legal body that varies from its owners. If all partner fails to be partners, for example if all partners die or become insolvent, the partnership firm is dissolved. A partnership firm suggested that all partners are put together. The members may come and go but the life of the organizations not influenced by a company becoming an individual distinct from the members.

One of the oldest styles of corporate partnerships is friendship. While limited liability firms have replaced partnership firms in complex businesses, partnership are still favored in India and abroad by practitioners and small trade and business enterprises. The act allows for a general form of partnership that is the most common form in India, but the most significant is the unconditioned liability of all partners for corporate debts and legal effects, regardless of their ownership, as the corporation is not a legal body, because overtime the general form of partnership has lost its appeal due to its intrinsic drawbacks.

[1] Tarsem Singh v. Sukhminder Singh (1998) 3 SCC 471



Author: Yashi Sharma,
Bennett University

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