Incoming and Outgoing Partners

Incoming and Outgoing Partners
31. Introduction of a partner- (1) Subject to contract between the partners and to the provisions of Section
30, no person shall be introduced as a partner into a firm without the consent of all the existing partners.
(2) Subject to the provisions of Section 30, 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 became a partner.
32. Retirement of a partner- (1) A partner may retire(a) with the consent of all the other partners.
(b) In accordance with an express agreement by the partners, or
(c) Where the partnership is at will, by giving notice in writing to all the other partners of his intention to
retire.
(2) A retiring partner may be discharged from any liability to any third party for acts of the firm done before
his retirement by an agreement made by him with such third party and the partners of the reconstituted firm,
and such agreement may be implied by a course of dealing between such third party and the reconstituted
firm after he had knowledge of the retirement.
(3) Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as
partners to third parties for any act done by any of them which would have been an act of the firm if done
before the retirement, until public notice is given of the retirement.
Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he
was a partner.
(4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted
firm.
33. 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 of 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.
34. 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 hereby 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.
35. 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.
36. 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.
(2) Agreements in restraint of trade- A partner may make an agreement with his partner 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
(9 of 1872), such agreement shall be valid if the restrictions imposed are reasonable.
37. Rights 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 whereby 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 or his estate, as the case may be, is not entitled to any further or
other share of profits; but if any partners assuming to act in exercise of the option does not in all materials
respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section.
38. 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 the 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.
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