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Indian Partnership Act,1932 
Aji R Lal 
Chindu Raj 
Rahul R G 
Indian Partnership Act,1932
PARTNERSHIP 
Meaning & Definition 
Definition 
According to The Indian 
PartnershipAct 1932 
“Partnership 
is the relation between 
two or more persons who 
have agreed to share the 
profits of a business 
carried on by all of them 
or any of them acting for 
all”. 
Meaning 
Simply speaking, a 
1 2 
partnership is an 
association of persons who 
conduct some business 
activity and agree to share 
profits earned out of it.
‘Partner’ ‘Firm’ and ‘Firm Name 
Section 4 of Indian Partnership Act, 1932 provides that 
Firm 
PARTNERS’ are 
collectively 
‘FIRM 
Partner 
1 
Firm Name 
The name under 
which their 
business is carried 
on is called the 
‘FIRM NAME’ 
Persons who 
have agreed into 
partnership with 
one another are 
called individually 
PARTNER 
2 3
Characteristics of a Partnership firm 
The partnership is a result of a contract or an 
agreement that is entered into between the partners. It 
does not arise from birth, status or inheritance or 
succession. The agreement between the partners is maybe 
in oral or written , the ore; agreement is known as 
Partnership Deed 
The contract or agreement between the persons may be oral or 
written. But usually, the contract is in writing. 
The persons who form a partnership must be 
competent or must have the capacity to enter into contract. 
Persons who do not have the capacity to enter into contract 
such as minors, insolvents, lunatics (persons with unsound 
mind) cannot become partners. 
Agreement 
Nature of 
agreement 
Competence to 
enter into 
contract
Characteristics of a Partnership firm 
To form a partnership at least two persons are 
required. The maximum number of partners is 
limited to 20, in case of general type of business 
and 10, in case of banking business. 
The agreement between partners must be to carry on 
some business which includes all lawful trade, 
occupation or profession. Hence, the presence of a 
business is a must and it does not cover any club or 
charitable association 
The agreement between the partners must be for 
making profits and sharing the profits among 
themselves. 
The partners share the profits in the agreed 
proportions. 
Number of 
partners 
Presence of 
business 
Sharing of 
profits
Characteristics of a Partnership firm 
Each partner acts in two capacities, i.e. he is both a 
principal and agent. As an agent, he can bind the other 
partners by his acts and as a principal; he is bound by 
the acts of other partners. 
The partnership business can be carried on by 
all the partners or by any one or more acting 
for all. 
The liability of partners is unlimited. If the firm fails 
to satisfy its debt, each partner is liable to repay out 
of his personal assets. 
Principal- 
Agent 
relationship 
Management 
Unlimited 
liability
Characteristics of a Partnership firm 
A partner cannot, without the consent of 
other partners, transfer his interest in the 
firm to an outsider. 
Each partner is a joint owner of the property of the firm and 
hence, in the eyes of law the firm and the partners are 
considered to be one and the same. Partnership has no 
separate existence apart from the partners composing it. 
The essence of partnership is based on the spirit of co-operation. 
Hence there should be mutual trust and 
mutual co-operation among partners. 
Non-transfer 
ability of 
interest 
Joint 
ownership 
Team 
spirit
Kinds of Partners 
Active partner 
A person who takes active interest in the conduct and management of the business of the firm is 
known as active or managing partner 
Sleeping partner 
Nominal Partner 
3 
A nominal partner is one who does not have any real interest in the business but lends his name 
to the firm, without any capital contributions, and doesn’t share the profits of the business. He 
also does not usually have a voice in the management of the business of the firm, but he is liable 
to outsiders as an actual partner. 
1 
A sleeping partner is a partner who ‘sleeps’, that is, he does not take active part in the 
management of the business. Such a partner only contributes to the share capital of the firm 
2 
Partner by estoppel or holding out 
4 
If a person, by his words or conduct, holds out to another that he is a partner, he will be 
stopped from denying that he is not a partner. The person who thus becomes liable to third 
parties to pay the debts of the firm is known as a holding out partner.
Cont…. 
Partner in profits only 
When a partner agrees with the others that he would only share the profits of the 
firm and would not be liable for its losses, he is in own as partner in profits only. 
Minor as a Partner 
Other Partners 
3 
In partnership firms, several other types of partners are also found, namely, secret partner 
who does not want to disclose his relationship with the firm to the general public. Outgoing 
partner, who retires voluntarily without causing dissolution of the firm, limited partner who 
is liable only up to the value of his capital contributions in the firm 
1 
A partnership is created by an agreement. And if a partner is incapable of entering into a 
contract, he cannot become a partner. Thus, at the time of creation of a firm a minor (i.e., a 
person who has not attained the age of 18 years) cannot be one of the parties to the contract. 
2
Kinds of Partnership
Partnership at Will 
[Sec.7 read with Sec.43)] 
When there is no provision in partnership agreement (known as 
partnership Deed, if in writing) for: 
– The duration of their partnership, or 
– The determination of their partnership, 
then the partnership is called ‘Partnership at Will’. 
Special feature of ‘Partnership at will’ is that such partnership may be 
dissolved by any partner by giving a notice in writing to all other 
partners of his intention to dissolve the partnership. 
The partnership will be dissolved from that date which is mentioned in 
the notice as the date of dissolution and if no date is mentioned then 
from the date of communication of notice.
Particular Partnership 
[sec. 8] 
When a partnership is formed for a 
• Specific venture or undertaking, or 
• Particular period (fixed term) 
then such partnership is called a ‘particular partnership’. 
Such partnership comes to an end on the completion of the venture or 
the expiry of time period. 
If such partnership is continued after the expiry of term or completion 
of venture, it is deemed to be a partnership at will. 
A particular partnership may be dissolved before the expiry of the term 
or completion of the venture only by the mutual consent of all the 
partners.
Partnership deed 
A partnership is formed by an agreement. This agreement 
may be in writing or oral. though the law does not expressly 
require that the partnership agreement should be in writing, it 
is desirable to have it in writing in order to avoid any dispute 
with regard to the terms of the partnership. The document 
which contains the term of a partnership as agreed among the 
partners is called “Partnership deed”. 
The Partnership Deed is to be duly stamped as per the 
Indian Stamp Act, and duly signed by all the partners.
Contents of Partnership Deed 
A partnership deed may contain any matter relating to the 
regulation of partnership but all provisions in the deed should be within 
the limits of Indian Partnership Act, 1932. 
Nature of business 
Duration of partnership 
Name of the firm 
Capital 
Share of partners in profits and losses 
Bank Account firm 
Books of account 
1 
2 
3 
4 
5 
6 
7
1 
2 
3 
4 
5 
6 
7 
Powers of partners 
Retirement and expulsion of partners 
Death of partner 
Dissolution of firm 
Settlement of disputes
Registration of 
Partnership
Obtaining prescribed form 
Preparing statement in the prescribed form 
Signing the statement 
Verifying the statement 
Submitting the statement with fee 
Registration 
Issue of certificate of registration 
Registration of Partnership
Right And Duties of Partners Subject to 
Contract 
(Between the Partners)
Right to take part in business 
Right to be consulted 
Right to access to books 
Right to share the profits 
Right in emergency 
Right as an agent of the firm 
Right to prevent admission of a new partner 
1 
2 
3 
4 
5 
6 
7 
8 
Right not to be expelled
To be faithful 
To render true accounts 
To give full information 
To indemnify for fraud 
Duty to share losses 
To act within authority 
To be liable for the act of the firm 
9 
10 
11 
12 
13 
14 
16 
To carry on business to the greater advantage 
15
DISSOLUTION OF A FIRM
Dissolution of Partnership 
and Dissolution of Firm
Cont… 
The dissolution of partnership between all the 
partners of a firm is called the dissolution of the 
firm. [section 39]. Thus, if some partner is 
changed/added/ goes out, the ‘relation’ between them 
changes and hence ‘partnership’ is dissolved, but the 
‘firm’ continues. However, complete breakage 
between relations of all partners is termed as 
‘dissolution of firm’. After such dissolution, the firm 
no more exists.
Cont… 
Thus, ‘Dissolution of partnership’ is 
different from ‘dissolution of firm’. 
‘Dissolution of partnership’ is only 
reconstruction of firm, while ‘dissolution of 
firm’ means the firm no more exists after 
dissolution.
Cont… 
Dissolution of a Firm - A partnership firm is an ‘organization’ 
and like every ‘organ’ it has to either grow or perish. Thus, 
dissolution of a firm is inevitable part in the life of partnership firm 
some time or the other.
Mode of Dissolution of Firm
Cont… 
Dissolution without the order of Court (Sec 40-43) 
Dissolution by Agreement - [section 40]. 
Compulsory dissolution in case of insolvency - [section 
41] 
Dissolution on the happening on certain contingencies 
[section 42] 
Dissolution by notice of partnership at will [section 43(2)]
By the Order of the Court 
A partner may apply to the court for getting the firm dissolved. On getting such application 
by any of the partner the court may proceed to order the dissolution of the firm in the following 
circumstances: 
1) If any of the partner becomes of unsound mind 
2) If a partner, other than the partner filing the suit is guilty of intentionally and persistently 
committing a breach of the partnership agreement. 
3) If a partner, other than the partner filing the suit has transferred whole of his interest in the firm 
to a third party without the consent of the other partners. 
4) If a partner, other than the partner filing the suit is guilty of misconduct. 
5) If a partner, other than the partner filing the suit has become disabled to perform his duties as a 
partner. 
6) If the court is satisfied that the business of the firm cannot be carried on except a loss. 
7) If the court considers it just and equitable to dissolve the firm due to some other reasons
Without the Intervention of the Court. 
1) If all the partners are willing and hereby agree to dissolve the 
firm. 
2) In the following circumstances: 
a) On the death of any partner. 
b) If any partner becomes insolvent. 
c) On the expiry of the duration of the firm. 
d) On the completion of the venture.
Indian Partnership Act 1932

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Indian Partnership Act 1932

  • 1. Indian Partnership Act,1932 Aji R Lal Chindu Raj Rahul R G Indian Partnership Act,1932
  • 2. PARTNERSHIP Meaning & Definition Definition According to The Indian PartnershipAct 1932 “Partnership is the relation between two or more persons who have agreed to share the profits of a business carried on by all of them or any of them acting for all”. Meaning Simply speaking, a 1 2 partnership is an association of persons who conduct some business activity and agree to share profits earned out of it.
  • 3. ‘Partner’ ‘Firm’ and ‘Firm Name Section 4 of Indian Partnership Act, 1932 provides that Firm PARTNERS’ are collectively ‘FIRM Partner 1 Firm Name The name under which their business is carried on is called the ‘FIRM NAME’ Persons who have agreed into partnership with one another are called individually PARTNER 2 3
  • 4. Characteristics of a Partnership firm The partnership is a result of a contract or an agreement that is entered into between the partners. It does not arise from birth, status or inheritance or succession. The agreement between the partners is maybe in oral or written , the ore; agreement is known as Partnership Deed The contract or agreement between the persons may be oral or written. But usually, the contract is in writing. The persons who form a partnership must be competent or must have the capacity to enter into contract. Persons who do not have the capacity to enter into contract such as minors, insolvents, lunatics (persons with unsound mind) cannot become partners. Agreement Nature of agreement Competence to enter into contract
  • 5. Characteristics of a Partnership firm To form a partnership at least two persons are required. The maximum number of partners is limited to 20, in case of general type of business and 10, in case of banking business. The agreement between partners must be to carry on some business which includes all lawful trade, occupation or profession. Hence, the presence of a business is a must and it does not cover any club or charitable association The agreement between the partners must be for making profits and sharing the profits among themselves. The partners share the profits in the agreed proportions. Number of partners Presence of business Sharing of profits
  • 6. Characteristics of a Partnership firm Each partner acts in two capacities, i.e. he is both a principal and agent. As an agent, he can bind the other partners by his acts and as a principal; he is bound by the acts of other partners. The partnership business can be carried on by all the partners or by any one or more acting for all. The liability of partners is unlimited. If the firm fails to satisfy its debt, each partner is liable to repay out of his personal assets. Principal- Agent relationship Management Unlimited liability
  • 7. Characteristics of a Partnership firm A partner cannot, without the consent of other partners, transfer his interest in the firm to an outsider. Each partner is a joint owner of the property of the firm and hence, in the eyes of law the firm and the partners are considered to be one and the same. Partnership has no separate existence apart from the partners composing it. The essence of partnership is based on the spirit of co-operation. Hence there should be mutual trust and mutual co-operation among partners. Non-transfer ability of interest Joint ownership Team spirit
  • 8. Kinds of Partners Active partner A person who takes active interest in the conduct and management of the business of the firm is known as active or managing partner Sleeping partner Nominal Partner 3 A nominal partner is one who does not have any real interest in the business but lends his name to the firm, without any capital contributions, and doesn’t share the profits of the business. He also does not usually have a voice in the management of the business of the firm, but he is liable to outsiders as an actual partner. 1 A sleeping partner is a partner who ‘sleeps’, that is, he does not take active part in the management of the business. Such a partner only contributes to the share capital of the firm 2 Partner by estoppel or holding out 4 If a person, by his words or conduct, holds out to another that he is a partner, he will be stopped from denying that he is not a partner. The person who thus becomes liable to third parties to pay the debts of the firm is known as a holding out partner.
  • 9. Cont…. Partner in profits only When a partner agrees with the others that he would only share the profits of the firm and would not be liable for its losses, he is in own as partner in profits only. Minor as a Partner Other Partners 3 In partnership firms, several other types of partners are also found, namely, secret partner who does not want to disclose his relationship with the firm to the general public. Outgoing partner, who retires voluntarily without causing dissolution of the firm, limited partner who is liable only up to the value of his capital contributions in the firm 1 A partnership is created by an agreement. And if a partner is incapable of entering into a contract, he cannot become a partner. Thus, at the time of creation of a firm a minor (i.e., a person who has not attained the age of 18 years) cannot be one of the parties to the contract. 2
  • 11. Partnership at Will [Sec.7 read with Sec.43)] When there is no provision in partnership agreement (known as partnership Deed, if in writing) for: – The duration of their partnership, or – The determination of their partnership, then the partnership is called ‘Partnership at Will’. Special feature of ‘Partnership at will’ is that such partnership may be dissolved by any partner by giving a notice in writing to all other partners of his intention to dissolve the partnership. The partnership will be dissolved from that date which is mentioned in the notice as the date of dissolution and if no date is mentioned then from the date of communication of notice.
  • 12. Particular Partnership [sec. 8] When a partnership is formed for a • Specific venture or undertaking, or • Particular period (fixed term) then such partnership is called a ‘particular partnership’. Such partnership comes to an end on the completion of the venture or the expiry of time period. If such partnership is continued after the expiry of term or completion of venture, it is deemed to be a partnership at will. A particular partnership may be dissolved before the expiry of the term or completion of the venture only by the mutual consent of all the partners.
  • 13. Partnership deed A partnership is formed by an agreement. This agreement may be in writing or oral. though the law does not expressly require that the partnership agreement should be in writing, it is desirable to have it in writing in order to avoid any dispute with regard to the terms of the partnership. The document which contains the term of a partnership as agreed among the partners is called “Partnership deed”. The Partnership Deed is to be duly stamped as per the Indian Stamp Act, and duly signed by all the partners.
  • 14. Contents of Partnership Deed A partnership deed may contain any matter relating to the regulation of partnership but all provisions in the deed should be within the limits of Indian Partnership Act, 1932. Nature of business Duration of partnership Name of the firm Capital Share of partners in profits and losses Bank Account firm Books of account 1 2 3 4 5 6 7
  • 15. 1 2 3 4 5 6 7 Powers of partners Retirement and expulsion of partners Death of partner Dissolution of firm Settlement of disputes
  • 17. Obtaining prescribed form Preparing statement in the prescribed form Signing the statement Verifying the statement Submitting the statement with fee Registration Issue of certificate of registration Registration of Partnership
  • 18. Right And Duties of Partners Subject to Contract (Between the Partners)
  • 19. Right to take part in business Right to be consulted Right to access to books Right to share the profits Right in emergency Right as an agent of the firm Right to prevent admission of a new partner 1 2 3 4 5 6 7 8 Right not to be expelled
  • 20. To be faithful To render true accounts To give full information To indemnify for fraud Duty to share losses To act within authority To be liable for the act of the firm 9 10 11 12 13 14 16 To carry on business to the greater advantage 15
  • 22. Dissolution of Partnership and Dissolution of Firm
  • 23. Cont… The dissolution of partnership between all the partners of a firm is called the dissolution of the firm. [section 39]. Thus, if some partner is changed/added/ goes out, the ‘relation’ between them changes and hence ‘partnership’ is dissolved, but the ‘firm’ continues. However, complete breakage between relations of all partners is termed as ‘dissolution of firm’. After such dissolution, the firm no more exists.
  • 24. Cont… Thus, ‘Dissolution of partnership’ is different from ‘dissolution of firm’. ‘Dissolution of partnership’ is only reconstruction of firm, while ‘dissolution of firm’ means the firm no more exists after dissolution.
  • 25. Cont… Dissolution of a Firm - A partnership firm is an ‘organization’ and like every ‘organ’ it has to either grow or perish. Thus, dissolution of a firm is inevitable part in the life of partnership firm some time or the other.
  • 27.
  • 28. Cont… Dissolution without the order of Court (Sec 40-43) Dissolution by Agreement - [section 40]. Compulsory dissolution in case of insolvency - [section 41] Dissolution on the happening on certain contingencies [section 42] Dissolution by notice of partnership at will [section 43(2)]
  • 29. By the Order of the Court A partner may apply to the court for getting the firm dissolved. On getting such application by any of the partner the court may proceed to order the dissolution of the firm in the following circumstances: 1) If any of the partner becomes of unsound mind 2) If a partner, other than the partner filing the suit is guilty of intentionally and persistently committing a breach of the partnership agreement. 3) If a partner, other than the partner filing the suit has transferred whole of his interest in the firm to a third party without the consent of the other partners. 4) If a partner, other than the partner filing the suit is guilty of misconduct. 5) If a partner, other than the partner filing the suit has become disabled to perform his duties as a partner. 6) If the court is satisfied that the business of the firm cannot be carried on except a loss. 7) If the court considers it just and equitable to dissolve the firm due to some other reasons
  • 30. Without the Intervention of the Court. 1) If all the partners are willing and hereby agree to dissolve the firm. 2) In the following circumstances: a) On the death of any partner. b) If any partner becomes insolvent. c) On the expiry of the duration of the firm. d) On the completion of the venture.