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Partnership

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30 views4 pages

Partnership

Uploaded by

gautamtaneja2005
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CONTRACT LAW-II

2ND SEMESTER, B.A.LL.B.(HONS.)


PARTNERSHIP

Presented By:
Saurabh Sharma
Assistant Professor in Legal Research,
Rajiv Gandhi National University of Law, Punjab
[email protected]
DEFINITION AND • Section 4 of the Indian Partnership Act, 1932 defines partnership
in the following words: “ ‘Partnership’ is the relation between
NATURE OF persons who have agreed to share profits of a business carried on
by all or any one of them acting for all”. Persons who have
PARTNERSHIP entered into partnership with one another are called individually
‘partners’ and collectively ‘a firm’ and the name under, which their
business is carried on is called the ‘firm name’.
• Section 4 of IPA, 1932 resonates (to large extent) the wordings of
repealed provision (Section 239 (e)) of ICA, 1872 dealing with
contract relating to partnership. The illustration of such repealed
provision are still relevant, like: (a) A and B buy 100 bales of
cotton, which they agree to sell for their joint account. A and B are
partners in respect of such cotton; (b) A and B buys 100 bales of
cotton, agreeing to share in between them. A and B are not
partners; and (c) A and B are joint owners of a ship. This
circumstance does not make them partners.
• Various forms in which business can be organized: self proprietor,
company, limited liability partnership, partnership, body of
association, etc.
L E G A L / J U R I D I C A L D I S S E C T I O N O F PA RT N E R S H I P

In Raghunath Sahu v. Trinath Das,


a Division Bench of the Orissa “Section 6 of IPA, 1932
High Court pointed out the three reiterates that in
essential elements of partnership- Thus, even when a deed
determining whether a
(i) an agreement between the is named as partnership
persons concerned, (ii) this group of person is or is
deed, courts have held
agreement should be for sharing not a firm, or whether a
profits of a business, and (iii) the that the nature of
person is or is not a
business should either be carried relationship is not
out on by all or any of them on partner in a firm, regard
determined by the mere
behalf of all. In Pratibha Rani v shall be had to the real
Suraj Kumar, Supreme Court use of the word
relation between the
pointed out two essential elements ‘partnership’ either in the
of partnership- (i) Some real or parties, as shown by all
argument or in the
external physical act by two relevant facts taken
persons to start a business, and (ii) pleading. It must satisfy
together” (Helper
if all carry or any one of them fulfilment of the
carries the business, partners shall Girdharbhai v. Saiyed
aforesaid criteria.
share profits on the basis of the Mohmad Mirasaheb
share allotted to them under the Kadri and Ors.).
agreement.
BREAKDOWN OF ELEMENTS REQUIRED IN
ESTABLISHING PARTNERSHIP
• Agreement: There can be no partnership without an agreement and Section 5 of IPA, 1932 further clarifies that
relation of partnership arises from contract and not from status. Hence the basis of partnership and firm is
partnership agreement. A partnership agreement is the source of partnership, it also gives expression to other
ingredients defining partnership, specifying the business agreed to be carried on, the persons who will actually
carry on the business, the shares in which the profits will be divided and several other considerations which
constitute such an organic relationship (Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes) v.
M/s. K Kelukutty).
• Business: Section 2|(b) of IPA, 1932, distinction between going concern and single transactions/time bound,
and business must be in existence and not in contemplation.
• Sharing of Profits: objective and motive of partnership should be sharing profits and is prima facie evidence of
partnership (Cox v Hickman).
• Mutual Agency: Relation of principal and agent between all partners.

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