Class Notes on Contract II – Unit IV (2nd Sem / 3 year LL.B)

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Indian Partnership Act

The Indian Partnership Act, 1932 is an act enacted by the Parliament of India to regulate partnership firms in India. It received the assent of the Governor-General on 8 April 1932 and came into force on 1 October 1932. Before the enactment of this act, partnerships were governed by the provisions of the Indian Contract Act. The act is administered through the Ministry of Corporate Affairs. The act is not applicable to Limited Liability Partnerships, since they are governed by the Limited liability Partnership Act, 2008.

Definition

Section 2 of the act defines,

(a) an “act of a firm” means 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;
(b) “business” includes every trade, occupation and profession;
(c) “prescribed” means prescribed by rules made under this Act; (c-1) “Registrar” means the Registrar of Firms appointed under sub-section (1) of section 57 and includes the Deputy Registrar of Firms and Assistant Registrar of Firms appointed under sub-section (2) of that section;
(d) “third party” used in relation to a firm or to a partner therein means any person who is not a partner in the firm; and
(e) expressions used but not defined in this Act and defined in the Indian Contract Act, 1872, shall have the meanings assigned to them in that Act.

Partnership refers to an agreement between persons to share their profits or losses arising on account of actions carried by all or one of them acting on behalf of all. The persons who have entered such an agreement are called partners and give their collective business a name, which is necessarily their firm-name. This relation between partners arises out of a contract or an agreement, which means a husband and wife carrying on a business or members of a Hindu undivided family re not into partnership. The share of profits received by any individual from the firm, money received by a lender of money, salary received by a worker or a servant, annuity received by a widow or a child of a deceased partner, does not make them a partner of the firm.

Nature, Mode of determining the existence of Partnership

  • Partnership not created by status
    The relation of partnership arises from contract and not from status;
    and, in particular, the members of a Hindu undivided family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying business as such, are not partners in such business.
  • Mode of determining existence of partnership – In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. [section 6].

    MUTUAL AGENCY IS THE REAL TEST – The real test of ‘partnership firm’ is ‘mutual agency’, i.e. whether a partner can bind the firm by his act, i.e. whether he can act as agent of all other partners.

  • Partnership at will – Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is “partnership at will”. [section 7]. – – Partnership ‘at will’ means any partner can dissolve a firm by giving notice to other partners (or he may express his intention to retire from partnership) – – Partnership deed may provide about duration of partnership (say 10 years) or how partnership will be brought to end. In absence of any such term, the partnership is ‘at will’. – – In case of ‘particular partnership’, the partnership comes to end when the venture for which it was formed comes to end.
  • Particular partnership
    A person may become a partner with another person in particular adventures or undertakings.

Relation of Partner to one another

General Duties of partners

section 9  of Indian Partnership Act, 1932 deals with General duties of partners.

Partners are bound to carry on the business of the firm to the greatest common advantage,

to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to

any partner or his legal representative.

Duty to indemnify for loss caused by fraud
Section 10 of Indian Partnership Act, 1932 deals with Duty to indemnify for 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.

Determination of rights and duties of partners by contract between the partners

 Section 11 of Indian Partnership Act, 1932 deals with Determination of rights and duties of partners by contract   between the partners.

Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing.

Such contract may be varied by consent of all the partners, and such consent may be expressed or may be implied by a course of dealing.

(2) Agreements in restraint of trade. Notwithstanding anything contained in section 27 of the Indian Contract Act, 1872, (9 of 1872) such contracts may provide that a partner shall not carry on any busi- ness other than that of the firm while he is a partner.

The conduct of the business

section 12 of Indian Partnership Act, 1932 deals with The conduct of the business.

Subject to contract between the partners-

(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 duties in the conduct of the business;

(c) any difference arising as to ordinary matters connected with the business may be decided by a 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 ; and

(d) every partner has a right to have access to and to inspect and copy any of the books of the firm.

Mutual rights and liabilities

Section 13 of Indian Partnership Act, 1932 deals with Mutual rights and liabilities.

Subject to contract between the partners-

(a) a partner is not entitled to receive remuneration for taking part in the conduct of the business;

(b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm ;

(c) where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits ;

(d) a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent. per annum ;

(e) the firm shall indemnify a partner in respect of payments made and liabilities incurred by him-

(i) in the ordinary and proper conduct of the business, and

(ii) in doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances ; and

(f) a partner shall indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm.

The property of the firm

Section 14 of Indian Partnership Act, 1932 deals with The property of the firm.

Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.

Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm.

Application of the property of the firm

Subject to the contract between the partners, the property of the firm shall be held
and used by the partners exclusively for the purposes of the business.

Personal profits named by partners

section 16 of Indian Partnership Act, 1932 deals with Personal profits earned by partners.

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.

Right and duties of partners

Section 17 of Indian Partnership Act, 1932 deals with Rights and duties of partners.

Subject to contract between the partners,-

(a) after a change in the firm, Where a change occurs in the constitution of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change, as far as may be;
(b) after the expity of the term of the firm, and. Where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership at will ; and

(c) where additional undertakings are carried out. where a firm constituted to carry out one or more adventures or undertakings carries out other adventures or undertakings, the mutual rights and duties of the partners in respect of the other adventures or undertakings are the same as those in respect of the original adventures or undertakings.

  • after a change in the firm
  • after the expiry of the term of the firm
  • where additional undertakings are carried out

Relation of partners with third parties

  • Partners to be agent of the firm
  • Implied authority of partner as agent of the firm
  • Extension and restriction of partner’s implied authority
  • Partner’s authority in an emergency
  • Mode of doing act to bind firm
  • EFFECT OF ADMISSION BY A PARTNER.
    An admission or representation made by a partner concerning the affairs of the firm
    is evidence against the firm, it is made in the ordinary course of business.
  • EFFECT OF NOTICE TO ACTING PARTNER. Notice to a partner who habitually acts in the business of the firm of any matter
    relating to the affairs of the firm operates as notice to the firm, except in the case of
    a
    fraud on the firm committed by or with the consent of that partner.
  • LIABILITY OF A PARTNER FOR ACTS OF THE FIRM.
    Every partner is liable jointly with all the other partners and also severally, for all
    acts of the firm done while he is a partner
  • LIABILITY OF THE FIRM FOR WRONGFUL ACTS OF A PARTNER.
    Where, by the wrongful act or omission of a partner acting in the ordinary course of
    the business of a firm or with the authority of his partners, loss or injury is caused to
    any third party, or any penalty is incurred, the firm is liable therefor to the same
    extent as the partner.
  • LIABILITY OF FIRM FOR MISAPPLICATION BY PARTNERS.
    Where –
    (a) a partner acting within his apparent authority receives money or property from a
    third party and misapplies it, or
    (b) 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.
  • HOLDINGOUT.
    (1) Anyone who by words spoken or written or by conduct represent himself, or
    knowingly permits himself to be represented, to be a partner in a firm, is liable as a
    partner in that firm to anyone who has on the faith of any such representation given
    credit to the firm, whether the person representing himself or represented to be a
    partner does or does not know that the representation has reached the person so
    giving credit.
    (2) Where after partner’s death the business continued in the old firm-name, the
    continued use of that name or of the deceased partner’s name as a part thereof shall
    not of itself make his legal representative or his estate liable for any act of the firm
    done after his death.
  • RIGHTS OF TRANSFEREE OF A PARTNER’S INTEREST.
    (1) A transfer by a partner of his interest in the firm, either absolute or by mortgage,
    or, by the creation by him of a charge on such interest, does not entitle the
    transferee, during the continuance of the firm, to interfere in the conduct of the business or to require accounts or to inspect the books of the firm, but entitles the
    transferee only to receive the share of profits of the transferring partner, and the
    transferee shall accept the account of profits agreed to by the partners.
    (2) If the firm is dissolved or if the transferring partner ceases to be a partner, the
    transferee is entitled as against the remaining partners, to receive the share of the
    assets of the firm to which the transferring partner is entitled and, for the purpose of
    ascertaining that share, to an account as from the date of the dissolution.
  • Section30
    MINORS ADMITTED TO THE BENEFITS OF PARTNERSHIP.
    (1) A person who is a minor according to the law to which he is subject may not be a
    partner in a firm, but, with the consent of all the partners for the time being, he may
    be admitted to the benefits of partnership.
    (2) Such minor has a right to such share of the property and of the profits of the firm
    as may be agreed upon, and he may have access to and inspect and copy any of the
    accounts of the firm.
    (3) Such minor’s share is liable for the acts of the firm but the minor is not
    personally liable for any such act.
    (4) Such minor may not sue the partners for an account or payment of his share of
    the property or profits of the firm, save when severing his connection with the firm,
    and in such case the amount of his share shall be determined by a valuation made as
    far as possible in accordance with the rules contained in section 48 :
    Provided that all the partners acting together or any partner entitled to dissolve the
    firm upon notice to other partners may elect in such suit to dissolve the firm, and
    thereupon the Court shall proceed with the suit as one for dissolution and for settling
    accounts between the partners and the amount of the share of the minor shall be
    determined along with the shares of the partners.
    (5) At any time within six months of his attaining majority, or of his obtaining
    knowledge that he had been admitted to the benefits of partnership, whichever date
    is later, such person may give public notice that he has elected to become or that he
    has elected not to become a partner in the firm, and such notice shall determine his
    position as regards the firm :
    Provided that, if he fails to give such notice, he shall become a partner in the firm on
    the expiry of the said six months.
    (6) Where any person has been admitted as a minor to the benefits of partnership in
    a firm, the burden of proving the fact that such person had no knowledge of such
    admission until a particular date after the expiry of six months of his attaining
    majority shall lie on the person asserting that fact.
    (7) Where such person becomes a partner –
    (a) his rights and liabilities as a minor continue upto the date on which he becomes a
    partner, but he also becomes personally liable to third parties for all acts of the firm
    done since he was admitted to the benefits of partnership, and (b) his share in the property and profits of the firm shall be the share to which he
    was entitled as a minor.
    (8) Where such person elects not be to become a partner, –
    (a) his rights and liabilities shall continue to be those of a minor under the section
    upto the date on which he gives public notice;
    (b) his share shall not be liable for any acts for the firm done after the date of the
    notice; and
    (c) he shall be entitled to sue the partners for his share of the property and profits in
    accordance with sub-section (4).
    (9) Nothing in sub-sections (7) and (8) shall affect the provisions of section 28.

Rights and duties of partner

Types of partners

 

Incoming / Admission of partners

INCOMING PARTNERS
No person shall be introduced as a partner into the firm without the consent of all existing partners…
A person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he becomes partner…

Outgoing Partners

  • Retirement of a partner
  • EXPULSION OF A PARTNER.
    (1) A partner may not be expelled from a firm by any majority of the partners, save
    in the exercise in good faith or powers conferred by contract between the partners.
    (2) The provisions of sub-sections (2), (3) and (4) of section 32 shall apply to an
    expelled partner as if he were a retired partner.
  • INSOLVENCY OF A PARTNER.
    (1) Where a partner in a firm is adjudicated an insolvent, he ceases to be a partner
    on the date on which the order of adjudication is made, whether or not the firm is
    thereby dissolved.
    (2) Where under a contract between the partners the firm is not dissolved by the
    adjudication of a partner as an insolvent, the estate of a partner so adjudicated is
    not
    liable for any act of the firm and the firm is not liable for any act of the insolvent,
    done after the date on which the order of adjudication is made.
  • LIABILITY OF ESTATE OF DECEASED PARTNER.
    Where under a contract between the partners the firm is not dissolved by the death
    of a partner, the estate of a deceased partner is not liable for any act of the firm
    done after his death.
  • RIGHTS OF OUTGOING PARTNER TO CARRY ON COMPETING BUSINESS.

(1) An outgoing partner may carry on a business competing with that of the firm and
he may advertise such business, but subject, to contract to the contrary, he may not
(a) use the firm-name,
(b) represent himself as carrying on the business of the firm, or
(c) solicit the custom of persons who were dealing with the firm before he ceased to
be a partner.

  •  AGREEMENT IN RESTRAINT OF TRADE.

A partner may make an agreement with his partners that on ceasing to be a partner he will not carry on any business similar to that of the firm within a specified period
or within specified local limits; and, notwithstanding anything contained in section 27
of the Indian Contract Act, 1872, such agreement shall be valid if the restrictions
imposed are reasonable.

  • RIGHT OF OUTGOING PARTNER IN CERTAIN CASES TO SHARE SUBSEQUENT PROFITS.
    Where any member of a firm has died or otherwise ceased to be a partner, and the
    surviving or continuing partners carry on the business of the firm with the property
    of the firm without any final settlement of accounts as between them and the
    outgoing partner or his estate, then, in the absence of a contract to the contrary, the
    outgoing partner or his estate is entitled at the option of himself or his
    representatives to such share of the profits made since he ceased to be a partner as
    may be attributable to the use of his share of the property of the firm or to interest
    at the rate of six per cent. per annum on the amount of his share in the property of
    the firm :
    Provided that where by contract between the partners an option is given to surviving
    or continuing partners to purchase the interest of a deceased or outgoing partner,
    and that option is duly exercised, the estate of the deceased partner, or the outgoing
    partner of his estate, as the case may be, is not entitled to any further or other
    share of profits, but if any partner assuming to act in exercise of the option does not
    in all material respects comply with the terms thereof, he is liable to account under
    the foregoing provisions of this section.
  • REVOCATION OF CONTINUING GUARANTEE BY CHANGE IN FIRM.
    A continuing guarantee given to a firm, or to a third party in respect of the
    transactions of a firm, is in the absence of agreement to the contrary, revoked as to
    future
    transactions from the date of any change in the constitution of the firm.

Dissolution of Firm

  • DISSOLUTION BY AGREEMENT.
    A firm may be dissolved with the consent of all the partners or in accordance with a
    contract between the partners.
    Section41
    COMPULSORY DISSOLUTION.
    A firm is dissolved
    (a) by the adjudication of all the partners or of all the partners but one as insolvent,
    or (b) by the happening of any event which makes it unlawful for the business of the
    firm to be carried on or for the partners to carry it on in partnership :
    Provided that, where more than one separate adventure or undertaking is carried on
    by the firm, the illegality of one or more shall not of itself cause the dissolution of the
    firm in respect of its lawful adventures and undertakings
    Section42
    DISSOLUTION ON THE HAPPENING OF CERTAIN CONTINGENCIES.
    Subject to contract between the partners a firm is dissolved
    (a) if constituted for a fixed term, by the expiry of that term;
    (b) if constituted to carry out one or more adventures or undertakings, by the
    completion thereof;
    (c) by the death of a partner; and
    (d) by the adjudication of a partner as an insolvent.
    Section43
    DISSOLUTION BY NOTICE OF PARTNERSHIP AT WILL.
    (1) Where the partnership is at will, the firm may be dissolved by any partner giving
    notice in writing to all the other partners of his intention to dissolve the firm.
    (2) The firm is dissolved as from the date mentioned in the notice as the date of
    dissolution or, if no date is so mentioned, as from the date of the communication of
    the notice.
    Section44
    DISSOLUTION BY THE COURT.
    At the suit of a partner, the Court may dissolve a firm on any of the following
    grounds, namely :-
    (a) that a partner has become of unsound mind, in which case the suit may be
    brought as well by the next friend of the partner who has become of unsound mind
    as by any other partner;
    (b) that a partner, other than the partner suing, has become in any way permanently
    incapable of performing his duties as partner;
    (c) that a partner, other than the partner suing, is guilty of conduct which is likely to
    affect prejudicially the carrying on of the business regard being had to the nature
    of the business;
    (d) that a partner, other than the partner suing, wilfully or persistently commits
    breach of agreements relating to the management of the affairs of the firm of the
    conduct of its business; or otherwise so conducts himself in matters relating to the
    business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;
    (e) that a partner, other than the partner suing, has in any way transferred the
    whole of his interest in the firm to a third party, or has allowed his share to be
    charged under the provisions of rule 49 of Order XXI of the First Schedule to the
    Code of Civil Procedure, 1908, or has allowed it to be sold in the recovery of arrears
    of land revenue or of any dues recoverable as arrears of land revenue due by the
    partner;
    (f) that the business of the firm cannot be carried on save at a loss; or
    (g) on any other ground which renders it just and equitable that the firm should be
    dissolved.
    Section45
    LIABILITY FOR ACTS OF PARTNERS DONE AFTER DISSOLUTION.
    (1) Notwithstanding the dissolution of a firm, the 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.
    (2) Notices under sub-section (1) may be given by any partner.
    Section46
    RIGHT OF PARTNERS TO HAVE BUSINESS WOUND UP AFTER DISSOLUTION.
    On the dissolution of a firm every partner or his representative is entitled, as against
    all the other partners or their representatives, to have the property of the firm
    applied in payment of the debts and liabilities of the firm, and to have the surplus
    distributed among the partners or which representatives according to their rights.
    Section47
    CONTINUING AUTHORITY OF PARTNERS FOR PURPOSES OF WINDING UP.
    After the dissolution of a firm the authority of each partner to bind the firm, and the
    other mutual rights and obligations of the partners, continue notwithstanding the
    dissolution, so far as may be necessary to wind up the affairs of the firm and to
    complete transactions begun but unfinished at the time of the dissolution, but not
    otherwise :
    Provided that the firm is in no case bound by the acts of a partner who had been
    adjudicated insolvent, but this proviso does not affect the liability of any person who
    has after the adjudication represented himself or knowingly permitted himself to be
    represented as a partner of the insolvent.
    Section48
    MODE OF SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS. In settling the accounts of a firm after dissolution, the following rules shall, subject
    to agreement by the partners, be observed :
    (a) Losses, including deficiencies of capital, shall be paid first out of profits, next out
    of capital, and, lastly, if necessary, by the partners individually in the proportions
    in which they were entitled to share profits;
    (b) the assets of the firm, including any sums contributed by the partners to make
    up deficiencies of capital, shall be applied in the following manner and order :
    (i) in paying the debts of the firm to third parties;
    (ii) in paying to each partner rateably what is due to him from the firm for advances
    as distinguished from capital;
    (iii) in paying to each partner rateably what is due to him on account of capital; and
    (iv) the residue, if any, shall be divided among the partners in the proportions in
    which they were entitled to share profits.
    Section49
    PAYMENT OF FIRM’S DEBTS AND OF SEPARATE DEBTS.
    Where there are joint debts due from the firm, and also separate debts due from any
    partner, the property of the firm shall be applied in the first instance in payment of
    the debts of the firm, and, if there is any surplus, then the share of each partner
    shall be applied in payment of his separate debts or paid to him. The separate
    property of any partner shall he applied first in the payment of his separate debts,
    and the surplus (if any) in payment of the debts of the firm.
    Section50
    PERSONAL PROFITS EARNED AFTER DISSOLUTION.
    Subject to contract between the partners, the provisions of clause (a) of section 16
    shall apply to transactions by any surviving partner or by the representatives of
    deceased partner, undertaken after the firm is dissolved on account of the death of a
    partner and before its affairs have been completely wound up :
    Provided that where any partner or his representative has bought the good will of the
    firm, nothing in the section shall affect his right to use the firm-name.
    Section51
    RETURN OF PREMIUM ON PREMATURE DISSOLUTION.
    Where a partner has paid a premium on entering into partnership for a fixed term,
    and the firm is dissolved before the expiration of that term otherwise than by the
    death of a partner, he shall be entitled to repayment of the premium or of such part
    thereof as may be reasonable, regard being had to the terms upon which he became
    a partner, and to the length of time during which he was a partner, unless –
    (a) the dissolution is mainly due to his own misconduct, or (b) the dissolution is in pursuance of an agreement containing no provision for the
    return of the premium or any part of it.
    Section52
    RIGHTS WHERE PARTNERSHIP CONTRACT IS RESCINDED FOR FRAUD OR
    MISREPRESENTATION.
    Where a contract creating partnership is rescinded on the ground of fraud or
    misrepresentation of any of the parties thereto, the party entitled to rescind is,
    without prejudice to any other right, entitle –
    (a) to a lien on, or right of retention of, the surplus of the assets of the firm
    remaining after the debts of the firm have been paid, for any sum paid by him for
    the purchase of a share in the firm and for any capital contributed by him;
    (b) to rank as a creditor of the firm in respect of any payment made by him towards
    the debts of the firm; and
    (c) to he indemnified by the partner or partners guilty of fraud or misrepresentation
    against all the debts of the firm.
    Section53
    RIGHT TO RESTRAIN FROM USE OF FIRM-NAME OR FIRM-PROPERTY.
    After a firm is dissolved, every partner or his representative may, in the absence of a
    contract between the partners to the contrary, restrain any other partner or his
    representative from carrying on a similar business in the firm-name or from using
    any of the property of the firm for his own benefit, until the affairs of the firm have
    been completely wound up :
    Provided that where any partner or his representative has brought the goodwill of
    the firm, nothing in this section shall affect his right to use the firm-name.
    Section54
    AGREEMENTS IN RESTRAINT OF TRADE.
    Partners may, upon or in anticipation of the dissolution of the firm, make an
    agreement that some or all of them will not carry on a business similar to that of the
    firm within a specified period or within specified local limits and notwithstanding
    anything contained in section 27, of the Indian Contract Act, 1872, such agreement
    shall be valid if the restrictions imposed are reasonable.
    Section55
    SALE OF GOODWILL AFTER DISSOLUTION.
    (1) In settling the accounts of a firm after dissolution, the goodwill shall, subject to
    contract between the partners, be included in the assets, and it may be sold
    either separately or along with other property of the firm.
    (2) RIGHTS OF BUYER AND SELLER OF GOODWILL.
    Where the goodwill of a firm is sold after dissolution, a partner may carry on a
    business competing with that of the buyer and he may 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 of the firm, or
    (c) solicit the custom of persons who were dealing with the firm before its
    dissolution.
    (3) AGREEMENTS IN RESTRAINT OF TRADE.
    Any partner may upon the sale of the goodwill of a firm, make an agreement with
    the buyer that such partner will not carry on any business similar to that of the firm
    within a specified period or within specified local limits, and, notwithstanding
    anything contained in section 27 of the Indian Contract Act, 1872 such agreement
    shall be valid if the restrictions are reasonable.

 

Registration of Firms

  • Section56
    POWER TO EXEMPT FROM APPLICATION OF THIS CHAPTER.
    The State Government of any State may, by notification in the Official Gazette, direct
    that the provisions of this Chapter shall not apply to that State or to any part thereof
    specified in the notification.
    Section57
    APPOINTMENT OF REGISTRAR OF FIRMS AND DEPUTY AND ASSISTANT REGISTRARS
    OF FIRMS.
    (1) The State Government may, by notification in the Official Gazette, appoint a
    Registrar of Firms who shall exercise, perform and discharge the powers, functions
    and duties of the Register under this Act throughout the State of Maharashtra.
    (2) The State Government may likewise appoint one or more Deputy Registrars of
    Firms and Assistant Registrars of Firms who shall exercise, perform and discharge all
    or such of the powers, functions and duties of the Registrar and in such areas as the
    State Government may, by notification in the Official Gazette, specify.
    (3) The officers appointed under sub-section (1) and sub-section (2) shall be deemed
    to be public servants within the meaning of section 21 of the Indian Penal Code.
    Section58
    APPLICATION FOR REGISTRATION.
    (1) Subject to the provisions of sub-section of sub-section (1A), the registration of a
    firm effected by sending by post or delivering to the Registrar of the area in which
    any place of business of the firm is situated or proposed to be situated, a statement
    in the prescribed form and accompanied by the prescribed fee and a true copy of the
    deed of partnership stating :
    (a) the firm-name, (aa) the nature of business of the firm;
    (b) the place or principal place of business of the firm,
    (c) the names of any other places where the firm carries on business,
    (d) the date when each partner joined the firm,
    (e) the names in full and permanent addresses of the partners, and
    (f) the duration of the firm.
    The statement shall be signed by all the partners, or by their agents specially
    authorised in this behalf.
    (1A) The statement under sub-section (1) shall be sent or delivered to the Registrar
    within a period of one year from the date of constitution of the firm :
    Provided that in the case of any firm carrying on business on or before the date of
    commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984, such
    statement shall be sent or delivered to the Registrar within a period of one year firm
    such date.
    (2) Each person signing the statement shall also verify it in the manner prescribed.
    (3) A firm shall not have any of the names or emblems specified in the Schedule to
    the Emblems and Names (Prevention of Improper Use) Act, 1950, or any colourable
    imitation thereof, unless permitted so to do under that Act, or any name which is
    likely to be associated by the public with the name of any other firm on account of
    similarity, or any name which, in the opinion of the Registrar, for reasons to be
    recorded in writing, is undesirable :
    Provided that nothing in this sub-section shall apply to any firm registered under any
    such name before the date of the commencement of the Indian Partnership
    (Maharashtra Amendment) Act, 1984.
    (4) Any person aggrieved by an order of the Registrar under sub-section (3), may,
    within 30 days from the date of communication of such order, appeal to the officer
    not below the rank of Deputy Secretary to Government authorised by the State
    Government in this behalf, in such manner, and on payment of such fee, as may be
    prescribed. On receipt of any such appeal, the authorised officer shall, after giving an
    opportunity of being heard to the appellant, decide the appeal, and his decision shall
    be final.
    Section59
    REGISTRATION.
    (1) When the Registrar is satisfied that the provisions of section 58 have been duly
    complied with, he shall record an entry of the statement in a register called the
    Register of Firms, and shall file the statement. [19 On the date such entry is
    recorded and such statement is filed, the firm shall be deemed to be registered. (2) The firm, which is registered, shall use the brackets and word (Registered)
    immediately after its name.
  • Section60
    RECORDING OF ALTERATIONS IN FIRM-NAME, NATURE OF BUSINESS AND PRINCIPAL
    PLACE OF BUSINESS.
    (1) When an alteration is made in the firm name or in the nature of business of a
    firm or in the location of the principal place of business of a registered firm, a
    statement shall be sent to the Registrar, within a period of 90 days from the date of
    making such alteration, accompanied by the prescribed fee, specifying the alteration
    and signed and verified in the manner required under section 58.
    (2) When the Registrar is satisfied that the provisions of sub-section (1) have been
    duly complied with, he shall amend the entry relating to the firm in the Register of
    Firms in accordance with the statement, and shall file it alongwith the statement
    relating to the firm filed under section 59.
    Section61
    NOTING OF CLOSING AND OPENING OF BRANCHES.
    When a registered firm discontinues business at any place or begins to carry on
    business at any place, such place not being its principal place of business, any
    partner or agent of the firm shall send intimation thereof to the Registrar, within a
    period of 90 days from the date of such discontinuance or, as the case may be, from
    the date on which the firm begins to carry on business at such place. The Registrar
    shall then make a note of such intimation in the entry relating to the firm in the
    Register of Firms, and shall file the intimation alongwith the statement relating to the
    firm filed under section 59.
    Section62
    NOTING OF CHANGES IN NAMES AND ADDRESSES OF PARTNERS. When any partner in a registered firm alters his name or permanent address, an
    intimation of the alteration’ shall be sent, within a period of 90 days from the date of
    making such alteration, by any partner or agent of the firm to the Registrar, who
    shall deal with it in the manner provided in section 61.
    Section63
    RECORDING OF CHANGES IN AND DISSOLUTION OF A FIRM.
    When a change occurs in the constitution of a registered firm, every incoming,
    continuing or outgoing partner, and when a registered firm is dissolved, every person
    who was a partner immediately before the dissolution, or the agent of every such
    partner or person specially authorised in this behalf shall, within a period of 90 days
    from the date of such change or dissolution, given notice to the Registrar of such
    change or dissolution, specifying the date thereof; and the Registrar shall a record of
    the notice in the entry relating to the firm in the Registrar of Firms and shall file the
    notice along with statement relating to the firm filed under section 59.
    (1A) Where a change occurs in the constitution of a registered firm, all persons, who
    after such change are partners of the firm, shall jointly send an intimation of
    such change duly signed by them, to the Registrar, within a period of 90 days from
    the date of occurrence of such change and the Registrar shall deal with it in the
    manner provided by section 61.
    (2) RECORDING OF WITHDRAWAL OF A MINOR.
    When a minor who has been admitted to the benefits of partnership in a firm attains
    majority and elects to become or not to become a partner, and the firm is then a
    registered firm, he, or his agent specially authorised in this behalf, shall within a
    period of 90 days from the date of his election, give notice to the Registrar that he
    has or has not become a partner, and the Registrar shall deal with the notice in the
    manner provided in sub-section (1).
    Section64
    RECTIFICATION OF MISTAKES.
    (1) The Registrar shall have power at all time to rectify any mistake in order to bring
    the entry in the Register of Firms relating to any firm into conformity with into
    documents relating to that firm filed under this Chapter.
    (2) On application made by the all parties who have signed any document relating to
    a firm filed under this Chapter, the Registrar may rectify any mistake in such
    document or in the record of note thereof made in the Register of Firms.
    Section65
    AMENDMENT OF REGISTER BY ORDER OF COURT.
    A Court deciding any matter relating to a registered firm may direct that the
    Registrar shall make any amendment in the entry in the Register of Firms relating to
    such firm which is consequential upon its decision; and the Registrar shall amend the
    entry accordingly. Section66
    INSPECTION OF REGISTER AND FILED DOCUMENTS.
    (1) The Registrar of Firms shall be open to inspection by any person on payment of
    such fee as may be prescribed.
    (2) All statements, notices and intimations filed under this Chapter shall be open to
    inspection, subject to such conditions and on payment of such fee as may be
    prescribed.
    Section67
    GRANT OF COPIES.
    The Registrar shall on application, furnish to any person, on payment of such fee as
    may be prescribed, a copy, certified under his hand, of any entry or portion thereof
    in the Register of Firms.
    Section68
    RULES OF EVIDENCE.
    (1) Any statement, intimation or notice recorded or noted in Register of Firms shall,
    as against any person by whom or on whose behalf such statement, intimation or
    notice was signed, be conclusive proof of any fact therein stated.
    (2) A certified copy of an entry relating to a firm in the Register of Firms may be
    produced in proof of the fact of the registration of such firm, and of the contents of
    any statement, intimation or notice recorded or noted therein.
    Section69
    EFFECT OF NON-REGISTRATION.
    (1) No suit to enforce a right arising from a contract or conferred by this Act shall be
    instituted in any Court by or on a behalf of any persons suing as a partner in a firm
    against the firm or any person alleged to be or to have been a partner in the firm
    unless the firm is registered and the person suing is or has been shown in the
    Register of Firms as a partner in the firm :
    Provided that the requirement of registration of firm under this sub-section shall not
    apply to the suits or proceedings instituted by the heirs or legal representatives of
    the deceased partner of a firm for accounts of the firm or to realise the property of
    the firm.
    (2) No suit to enforce a right arising from a contract shall be instituted in any court
    by or on behalf of a firm against any third party unless the firm is registered and the
    persons suing are or have been shown in the Register of Firms as partners in the
    firm.
    (2A) No suit to enforce any right for the dissolution of a firm or for accounts of a
    dissolved firm or any right or power to realise the property of a dissolved firm shall
    be instituted in any Court by or on behalf of any person suing as a partner in a firm
    against the firm or any person alleged to be or have been a partner in the firm,
    unless the firm is registered and the person suing is or has been shown in the
    Register of Firms as a partner in the firm : Provided that the requirement of registration of firm under this sub-section shall not
    apply to the suits or proceedings instituted by the heirs or legal representatives of
    the deceased partner of a firm for accounts of a dissolved firm or to realise the
    property of a dissolved firm.
    (3) The provisions of sub-sections (1), (2) and (2A) shall apply also to a claim of setoff or other proceedings to enforce a right arising from a contract but shall not affect
    (a) the firms constituted for a duration upto six months or with a capital upto two
    thousand rupees; or;
    (b) the powers of an official assigned, receiver or Court under the Presidency Towns
    Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property
    of an insolvent partner.
    (4) This section shall not apply
    (a) to firms or partners in firm which have no place of business in the territories to
    which this Act extends, or whose places of business in the said territories are
    situated in areas to which, by notification under section 56 this Chapter does not
    apply, or
    (b) to any suit or claim of set-off not exceeding one hundred rupees in value which,
    in the presidency towns, is not of a kind specified in section 19 of the Presidency
    Small Cause Courts Act, 1882, or outside the Presidency towns, is not of a kind
    specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or
    to any proceeding in execution or other proceeding incidental to or arising from any
    such suit or claim.

Unit – IV Important Case Laws

  • Cooper V.Shepherd,1846 (3) CB 226
  • Chanter V. Hopkins,1838 (51) RR 650
  • State V.Sinha Govindji,AIR 1967 Del.88
  • Whitehom Bros.V.Davison,1911 (1) KB 468
  • Jugar Keshwar V.Kishorlal,AIR 1924 Pat.159

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