Dr.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW
ACADEMIC SESSION:
2017 – 2018

SUBJECT- FAMILY LAW

JOINT HINDU FAMILY DIFFERENT FROM

PARTNERSHIP

SUBMITTED TO: SUBMITTED BY:

Ms. SHAKUNTALA AMRITA VERMA
Assistant Professor (Law) Roll No 29, Sec. A
Dr. RMLNLU, Lucknow B.A. LL.B (Hons.) SEM. IV
TABLE OF CONTENTS
1. Regulating law:..................................................................................................................... 3

2. Mode of creation: ................................................................................................................. 3

3. Admission of new members: ............................................................................................... 5

4. The position of females: ....................................................................................................... 6

5. Number of members: ........................................................................................................... 6

6. Authority of members: ........................................................................................................ 6

7. Liability of members: .......................................................................................................... 7

8. Right of members to share in profits: ................................................................................ 8

9. Effect of death of a member:............................................................................................. 11

CONCLUSION ...................................................................................................................... 13
1. Regulating law:
A partnership is governed by the provisions of the Indian Partnership Act, 1932. A joint
Hindu family business is governed by the principles of Hindu law.

2. Mode of creation:
A partnership arises out of a contract, whereas a joint Hindu family business arises by the
operation of law and is not the result of a contract.

In the case of CHANDRAKANT MANILAL SHAH AND ANOTHER vs. COMMISSIONER

OF INCOME TAX1 where Chandrakant Manilal Shah was the karta of a Hindu undivided
family (HUF) and the family was carrying on business in cloth. Naresh Chandrakant, one of
the sons of Chandrakant Manilal Shah, joined the business on a monthly salary of Rs. 100
since about April, 1959. It was asserted that, with effect from November 1, 1959, the business
had been converted into a partnership between Chandrakant Manilal Shah as karta of the
Hindu undivided family and Naresh Chandrakant. The deed of partnership executed in this
behalf on November 12, 1959, indicated that Naresh Chandrakant had been admitted as a
working partner with effect from November 1, 1959, having 35 per cent. share in the profits
and losses of the firm and the remaining 65 per cent share was held by Chandrakant Manilal
as the karta of the Hindu undivided family. An application was made for registration of the
firm which was dismissed by the Income-tax Officer on the ground that there was no valid
partnership.
Here the issue was of valid partnership i.e. "Whether, on the facts and in the circumstances
of the case, there was a valid partnership under annexure A between Shri Chandrakant, as the
karta of the Hindu undivided family and Shri Naresh, a member of the family ?"
It has been urged by learned counsel for the appellants that the mere fact that-:
1-Naresh Chandrakant had neither separated from the Hindu undivided family.
2-Nor he brought in any cash asset as his capital contribution to the partnership
3-instead he was contributing only his skill and labour
The above three points could not, in law, detract from a valid partnership being created.2

1
1992 SCC (1) 76.
2
Pitamberdas Bhikhabhai and Co v. CIT , [1964]53ITR341(Guj).
 In Ramchand Nawalrai v. CIT 3, it was held by the Madhya Pradesh High Court as here
under the main question is whether a coparcener can enter into a valid partnership with the
karta of his family by contributing merely skill and labour did not arise for decision. The only
question in the case was whether the individual members of a Hindu undivided family can,
without contributing anything, become members of a partnership constituted between the
karta and strangers. This question had necessarily to be answered in the negative on the
settled view that when a karta enters into a partnership with strangers it is the karta alone who
is the partner.
Different view:
If members of a coparcenary are to be regarded as having become partners in a firm with
strangers, they would become under the partnership law partners inter se, and it would cut at
the very root of the notion of a joint undivided family to hold that with reference to
coparcenary properties the members can at the same time be both coparceners and partners.4
There seems no valid reason why a coparcener cannot, by contributing merely his skill and
labour, enter into a partnership with karta. If the former does not cut at the root of the notion
of the joint Hindu family, the latter also does not. Even in the case of the former, the
partnership property will consist of the contribution made by the karta from the coparcenary
property and the contribution made by the coparcener of his individual property. Both taken
together would become partnership property in which all the partners would have interest in
proportion to their share in the joint venture of the business of partnership.
In Addanki Narayanappa v. Bhaskara Krishnappa5 it was stated that, if in such a situation
the coparcener entering into the partnership can be a partner in relation to coparcenary
property contributed for the partnership business, there can be no difficulty in holding that the
same result would follow when the coparcener entering into a partnership only contributes his
skill and labour.
In the former case, as stated by the Privy Counsel in Lachhman Das case6, the coparcener
entering into the partnership retains his share and interest in the family property while
simultaneously enjoying the benefit of his separate property and fruits of its investment. In
the same way, it can be said that in the latter case the coparcener retains his share and interest
in the property of the family while simultaneously enjoying the benefits of his skill and

3
1981 130 ITR 826 M.P.
4
Lachhman Das cas, [1948] 16 ITR 35.
5
1966 AIR 130.
6
[1948] 16 ITR 35.
labour which he contributes as consideration for formation of the partnership and for sharing
profits.

3. Admission of new members:

In a partnership no new partner is admitted without the consent of all the partners, while in
the case of a joint Hindu family firm a new member is admitted just by birth.
The relationship between coparceners in connection with joint family business is not based
on contract but on status and is created by operation of law. That is why Section 5 of the
Partnership Act excludes the members of a Hindu undivided family carrying on family
business as such from the description of the partners. The members of a Hindu undivided
family carrying on family business are therefore not partners. Nor is the joint Hindu family a
firm within the meaning of the Partnership Act though that terminology may be used loosely
in relation thereto. A joint Hindu family is a unit to which no outsider can be admitted by
agreement; it is a status which can only be acquired by birth or adoption. Then again it must,
as a unit, act through some person and the only person who can act is the Karta or manager
who may be a single individual or several adult members. In relation to the family business
in the nature of trade, the rights and liabilities of coparceners constituting the family firm are
therefore not to determined by exclusive reference to the Partnership Act. So long as the trade
is being carried on by them and no strangers are associated with them in any manner its
incidents must be regulated essentially by Hindu Law.
In Mathura Prasad v. Commissioner of Income tax, U.P7 . The facts as conceded before the
tribunal are : Mathura Prasad, the manager of his HUF had entered into a partnership as
representing his family of which he was the karta and for the benefit of the family. There was
also not dispute that in the firm of Badri Prasad Jagan Prasad, the assets of the assessee
family were invested. The tribunal found that Mathura Prasad, the manager, became a partner
in the firm with the help of joint family funds and as partner he was entrusted with the
management of the Agarwal Iron Works. On the basis of those facts, it was held that the
allowance received by Mathura Prasad was therefore directly related to the investment of the
family funds in the partnership business. In the course of the judgment, it was observed : "It
was suggested that Mathura Prasad earned the allowance sought to be brought to tax because
of the special aptitude he possessed for managing the Agarwal Iron Works and the allowance

7
1965 55 ITR 476 All.
claimed by him was not earned by the use of the joint family funds. But no such contention
was raised before the High Court. We have been taken through the petition filed in the High
Court under Section 66(2) of the Act, add there is no averment to the effect that Mathura
Prasad had any special aptitude for management of the Agarwal Iron Works, and what was
agreed to be paid to him was as remuneration for performing services because of such
aptitude."

4. The position of females:

In a partnership women can be full-fledged partners, while in a joint Hindu family business
membership is restricted to male members only. After the passage of the Hindu Succession
Act, 1956, females get only co-sharer’s interest at the death of a coparcener and they do not
become coparceners themselves.

5. Number of members:
In partnership the maximum limit of partners is 10 for banking business and 20 for any other
business but there is no such maximum limit of members in the case of joint Hindu family
business.

6. Authority of members:
In partnership each partner has an implied authority to bind his co-partners by act done in the
ordinary course of the business, there being mutual agency between various partners.
In a joint family business all the powers are vested in the ‘Karta’ and he is the only
representative of the family who can contract debts or bind his coparceners by acts done in
the ordinary course of business, there being no mutual agency between various coparceners.
But a coparcener other than the ‘Karta’ of the family may be authorized expressly or by
implication to contract debts on behalf of the firm (Lai Chand vs. Ghanayalal).
"Where a managing member of a joint family enters into a partnership with a stranger, the
other members of the family do not ipso facto become partners in the business so as to clothe
them with all the rights and obligations of a partner as defined by the Indian Partnership Act.
In such a case the family as a unit does not become a partner but only such of its members as
in fact enter into a contractual relation with the stranger, the partnership will be governed by
the Act." This statement of law has been approved of by the Privy Council in Pichappa
Chettiar v. Chokalingam Pillai,8 and also accepted by the Supreme Court in Charan Das
Haridas v. Commissioner of Income Tax, Bombay North, Kutch and Sau-rastra,
Ahmedabad.9
It is plain from the language used that the Karta or the adult members of a joint Hindu family,
where:10
1-It is a trading family, may enter into a partnership with a stranger or strangers representing
the Joint Hindu family.
2-The family as a unit on that account does not become partner
3-only such of its members as in fact enter into a contractual relation with the stranger, and
the partnership will be governed by the Act.

7. Liability of members:
In partnership, the liability of the partners is joint and several as well as unlimited. In other
words, each partner is personally and jointly liable to an unlimited extent and if partnership
liabilities cannot be fully discharged out of the partnership property each partner’s separate
personal property is liable for the debts of the firm.
In a joint Hindu family business only the ‘Karta’ is personally liable to an unlimited extent,
i.e., his self-acquired or other separate property besides his share in the joint family property
is liable, for debts contracted on behalf of the family business.
Other coparceners’ liability is limited to the extent of their interest in the joint family
property and they do not incur any personal liability.
But an adult coparcener can be made personally liable if he is also, expressly or impliedly, a
party to the contract or if he has subsequently ratified and accepted the transaction out of
which the obligation of the creditor arose (Lai Chand vs. Ghanayalal).
PERSONAL CAPACITY- The first is, as stated by Mayne, where a managing member of
a joint Hindu family enters into partnership with a stranger in relation to a business whose
capital in whole or in part is derived from the property or funds of the joint family, the family
as a unit or the entire body of the family members do not ipso facto become partners In that
partnership business. The partnership will be confined to the strangers and such of the

8
AIR 1034 PC 192.
9
[1960]39ITR202(SC).
10
Ramakrishna Transports, Kalahasti vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad
(15.07.1966 - APHC).
members of the family who have actually entered into partnership with them. Secondly the
members of the family in their personal or individual capacity can quad their separate
property enter into partnership with the karta of the joint family who represents the joint
family .11
KARTAS INDIVIDUAL CAPACIY-
The Allahabad High Court in Ramkumar Ramniwas. In re12. expressed the view that the
adult members of the family acting within their rights under the Hindu law may be able to
enter into partnership and make the entire joint family liable for the debts of the partnership
and be entitled to the benefits thereof.
The Madras High Court in Bagyalaxmi & Co. v. Commissioner of Income Tax, Madras13,
approved of the principle of some members of joint family representing the family entering
into a partnership with a stranger. The Bombay High Court also has in an unreported case
Commissioner of Income Tax v. Ganesh Narayan Onkarmal, I.T Ref No. 11 of 1947 decided
on 16th March 1948 (Bom) accepted the principle that two or more members of a undivided
Hindu Family can enter into a partnership with strangers rendering themselves accountable
for their individual shares to the Joint family.
In Commissioner of Income Tax M.P. v. Hukamchand Mannalal & Co.)14 the Madhya
Pradesh High Court has referred In this case It was a case where the instrument of partnership
showed that there were ten persons representing the four branches with different shares so as
to give each branch quarter share in the profits and loss of the business. It was contended that
while the karta of a Hindu undivided family could enter into a partnership with a stranger,
two or more members of the joint family could not in their individual capacity, enter into a
partnership with outsiders Chagla, C. J., said in the case of Ramakrishna Transports,
Kalahasti vs. Commissioner of Income Tax, Andhra Pradesh, Hyderbad (15.07.1966 - APHC).

8. Right of members to share in profits:

In a partnership each partner is entitled to claim his separate share of profits but a member of
a joint Hindu family business has no such right. His only remedy lies in a suit for partition.

11
Ramakrishna Transports, Kalahasti vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad
(15.07.1966 - APHC).
12
[1952]22ITR474(All).
13
[1961]42ITR727(Mad).
14
[1965]57ITR213(MP.
 The question is whether more than one coparcener representing a Hindu undivided family
can enter into a valid partnership with strangers. The question involving as it does a
consideration of the principles of Hindu law and also the Partnership Act steering clear of all
possible conflict must necessarily present considerable difficulty. The coparceners of Hindu
undivided family are not partners within the meaning of that term in the Partnership Act.
Partnership according to the Partnership Act, is the relation between persons who have agreed
to share the profits of the business carried on by all or any of them acting for all. The persons
who have thus entered into the contract are called individually partners and collectively a
firm.
Tendolkar, J. observed:-- "It is now well established that a member of a joint Hindu family
can enter into a partnership with an outsider may be that in such a partnership he represents
the joint family of which he is a member and if so, he is accountable to the joint family for
the profits of such business and cannot retain those profits for himself, but qua the partnership
he is certainly a partner. The position is not any different when instead of one coparcener of
the Joint family two or more coparceners of that joint family enter into a partnership with the
outsider. So far as the partnership is concerned, they have their individual shares in the
partnership it may be that in this partnership they represent the joint family or use joint family
funds for the purposes of the partnership. They are accountable to the joint family for the
profits made in the partnership But the fact that the profits earned by a coparcener who is
partner in a firm ensure for the benefit of the joint family does not make it any the less
partnership for purposes of section 26-A. The above observations are to the effect that a
partnership with strangers entered into by more than one coparcener representing the family
is valid in law for purposes of Section 26A. It may be stated here that the expression
"individual capacity" used here is not the same as personal capacity qua separate property. 15

(Yajnavalkya 2, verses 119-120).

"Whatever else is acquired by the coparcener himself, without detriment to the father's estate,
as a present from a friend or a gift at nuptials, does not appertain to co-heirs. Nor shall he,
who receives hereditary property which had been taken away, give it up to coparceners; nor
what has been gained by science."

15
Ramakrishna Transports, Kalahasti vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad
(15.07.1966 - APHC).
 Commenting on this text of Yajnavalkya the author of Mitakshara states : "The author
explains what may not be divided : whatever else is acquired by the coparcener himself,
without detriment to the father's estate, as a present from a friend, or a gift at nuptials does
not appertain to the co-heirs. Nor shall he, who recovers hereditary property, which had been
taken away, give it up to the coparceners; nor what has been gained by science."16
The Privy Council in Appovier v. Rama Subba Aiyan17 observed : "Nothing can express
more definitely a conversion of the tenancy, and with that conversion a change of the status
of the family quoad this property. The produce is no longer to be brought to the common
chest, as representing the income of an undivided property, but the proceeds are to be enjoyed
in six distinct equal shares by the members of the family, who are thenceforth to become
entitled to those definite shares".
In the case of Charandas Haridas and Anr. vs. The Commissioner of Income Tax, Bombay
North, Kutch, Saurashtra and Ahmedabad and Anr.18 The facts are as such, Charandas
Haridas was the Karta of the Hindu undivided family consisting of his wife, three sons and
himself. He was a partner in six managing agency firms in six Mills. In previous years, the
income received by him as partner in these managing agencies was being assessed as the
income of the Hindu undivided family. On December 31, 1945, Charandas Haridas acting for
his three minor sons and himself and Shantaben, his wife, entered into an oral agreement for a
partial partition. By that agreement Charandas Haridas gave an one pie share to his daughter,
Pratima, in the managing agency commission from two of the six managing agencies held by
the family. The balance together with the shares in the other managing agencies was divided
into five equal shares between Charandas Haridas, his wife and sons. This agreement was to
come into effect from January 1, 1946, which was the beginning of a fresh accounting year.
On September 11, 1946, Charandas Haridas acting for himself and his minor sons, and
Shantaben executed a memorandum of partial partition in which the above facts were recited,
the document purporting to be a record of what had taken place orally earlier. 4. In the
assessment years 1947-48 and 1948-49, Charandas Haridas claimed that the income should
no longer be treated as the income of the Hindu undivided family but as the separate income
of the divided members. The Income-tax Officer declined to treat the income as any but of
the Hindu undivided family, and assessed the income as before. An appeal to the Appellate
Assistant Commissioner was unsuccessful, and the matter was taken to the Income-tax
16
V.D. Dhanwatey vs. The Commissioner of Income Tax, M.P. Nagpur (26.10.1967 - SC).
17
(1866) 11 M.I.A. 75.
18
1960 AIR 910.
Appellate Tribunal. The Appellate Tribunal held that by the document in question, the
division, if any, was of the income and not of the assets from which the income was derived,
inasmuch as "the agreements of the managing agency with the managed Companies did not
undergo any change whatever as a result of the alleged partition". The Appellate Tribunal,
therefore, held that the arrangement to share the receipts from this source of income was not
binding on the Department, if the assets themselves continued to remain joint. It further held
that the document was "a farce", and did not save the family from assessment as Hindu
undivided family. The Tribunal having declined to state a case under s. 66(1) of the Indian
Income-tax Act, Charandas Haridas moved the Bombay High Court, and obtained an order
under s. 66(2) of the Act. The question on which the case was stated was : "Whether there
were materials to justify the finding of the Tribunal that the income in the share of the
commission agency of the Mills was the income of the Hindu undivided family ?"
It is, therefore, manifest that the family took the fullest measure possible for dividing the
joint interest into separate interests. There is no suggestion here that this division was a mere
pretence; nor has the Appellate Tribunal given such a finding. The document was fully
effective between the members of the family, and there was factually no Hindu undivided
family in respect of these particular assets. The assets at all times stood in the name of
Charandas Haridas, and looked at from the point of view of the law of Partnership, the family
had no standing. The assets still are in the name of Charandas Haridas, and looked again from
the same viewpoint, the division has no different signification. What has altered is the status
of the family. While it was joint, the Department could treat the income as that of the family;
but after partition, the Department could not say that it was still the income of the Hindu
undivided family, when there was none. In the face of the finding that this was a genuine
document and not a sham, and that it effectually divided the income and in the circumstances,
the assets, the question answers itself in the negative, that is to say, that there were no
materials to justify the finding that the income in the share of the commission agency of the
Mills was the income of the Hindu undivided family.

9. Effect of death of a member:

A partnership, subject to contract between the partners, is dissolved on the death of a partner,
but a joint Hindu family firm is not dissolved on the death of a coparcener (Baij Nath vs.
Ram Gopal).
 In the Partnership Act of 1932, which by Section 4 declares that partnership is the relation
between persons who have agreed to share the profit of a business carried on by all or any of
them acting for all. Section 5 says that 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 are not partners in such...business. It is however pointed out at p. 354 of Mr.
Golap Chandra Sarkar Shastri's well-known treatise on Hindu Law that joint Hindu family
trade is a species of ancestral joint property : in which every member of a Mitakshara joint
family acquires by birth an interest in the same way as in other kinds of property. They
become not only coparceners but also copartners of the trading firm. A joint family trading
partnership appears to differ from ordinary partnership in two respects, namely (i) it is not
dissolved by the death of any member and (ii) a member of the family becomes a co-partner
by operation of law.19

In Ramlal Thakursidas v. Lakshmichand Muniram20 an ancestral trade may descend, like

other inheritable property, upon the members of a Hindu undivided family. The partnership
so created or surviving has many, but not all of the elements existing in an ordinary
partnership. For example, the death of one of the partners does not dissolve the partnership.
Nor, as a rule, can one of the partners, when severing his connexion with the business, ask for
an account of past profits and losses.

The death of a coparcener or the managing member does not dissolve the joint family
firm and property passes by survivorship, the partnership under the Partnership Act is
dissolved ordinarily by the death of a partner. A coparcener cannot ask for an account of past
profits or losses. But it is otherwise in a partnership. In a joint family firm ordinarily it is
only the managing member who can act on behalf of the family and bind his coparceners by
his acts; but sometimes for the convenience of trade or business by arrangement the amongst
members not only one manager but several persons with equal powers are entrusted with the
duty of managership. In such a case the act of any one will bind all the coparceners. The
Manager or managers of the joint family firm have implied authority to contract debts and
pledge the properties and credit of the family for the ordinary purposes of family business.
No other person has such authority. But in partnership each is the agent of the other. There is
also difference as to the extent of liabilities for debts contracted. These and other differences

19
. Baij Nath Prasad and Ors. vs. Ram Gopal Lachhmi Narayan and Ors, AIR 1939 CAL 92.
20
(1861) 1 Bom H.C.R (Appx) 51.
create considerable difficulty when the case on its particular facts and circumstances attracts
the provisions of both the Hindu law and the law of partnership.21

CONCLUSION

 The relation of partnership aeries from contract , and not from status where as in
Hindu Joint Family Firm arises from status and not from contract. It arises by
operation of law.
 In partnership firm members will have no right by birth but in Hindu joint family
business son gets right by birth.
 Every partnership firm is governed by the provisions of Indian Partnership Act,1932,
Indian Contract Act 1872 etc. Every Joint family Firm is governed by the codified
Hindu Laws.
 In partnership rights and duties of partners are determined by the provisions of
Partnership Act and Partnership Agreement. In Hindu Joint family Firm rights and
duties of members of the family are controlled by such general principles of Hindu
law which contract the transactions of joint family.
 A partnership firm may be constituted irrespective of the members’ caste and religion.
A joint Hindu family firm is limited to Hindu Religion, that too the caste to which the
members belong.
 In absence of an agreement of contrary intention on death or insolvency of any partner
Partnership Firm Dissolves. A joint Hindu Family firm does not dissolve on the death
of any family member. Successor of the deceased gets his interest and business of the
firm continues as usual.
 No person can be introduced as a partner without the consent of all the members. A
member of Hindu joint family acquires an interest in the firm business by birth,
marriage, adoption etc. No consent of other members necessary. Other members
cannot deprive his right.
 In partnership any member can ask for the account of acts done by his co-partners.
Any partner can ask for details of profit and loss also. In Hindu joint family any

21
Ramakrishna Transports, Kalahasti vs. Commissioner of Income Tax, Andhra Pradesh, Hyderabad, AIR
1967 AP 237.
 member cannot ask for account of profit and loss of serving his relation with the
business.
 Partnership is a specific application of the principles of agency. It is often said “The
law of partnership is undoubtedly, a branch of the law of Principal and Agent”. The
principal of agency does not apply in case of Joint Hindu family firm.
 In Partnership every partner is the principal and agent of the firm, therefore, all the
partners are liable for the acts done by any partner for the conduct of the business of
the firm. Manager of a Hindu joint family firm is vested with a right to take loan,
pledge family property for the conduct of the business, but other members of the
family do not have these right.
 There is restriction on the maximum number of members in the case of a partnership
firm. Minimum two and maximum twenty partners allowed. There is no such
restriction.
 In partnership every partner is jointly and severally liable for debts and liabilities of
the firm. Liability of every partner is unlimited. Beside the property of the firm
personal property of a firm is also liable for the liabilities of the firm. The liability of
the members is limited to the extent of his interest in the assets of Hindu Joint Family.
BIBLIOGRAPHY
Indian Partnership Act,2010.
Introduction to Law of Partnership,2005.
Hindu Succession Act, 1956 (2006).
Handbooks on Hindu Succession:property rights of women and daughters, 2011
Das, P. K.
Manupatra
SCC Online
Lex India
Wikipedia