The Indian Partnership Act 1932
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In India it is governed by the Indian Partnership Act, 1932, which extends to the whole of India except the State of Jammu and Kashmir. It came into force on 1st October 1932.
A partnership is the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting or all.
A partnership agreement can be entered into between persons who are competent to contract. Every person who is of the age of majority according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject can enter into a partnership.
HINDU UNDIVIDED FAMILY:
A Karta of the Hindu undivided family can become a partner in a partnership in his individual capacity, provided the member has contributed his self acquired or personal skill and labour
A company is a juristic person and therefore can become a partner in a partnership firm, if it is authorised to do so by its objects.
Trustees of private religious trust, family trust and trustees of Hindu mutts or other religious endowments are juristic persons and can therefore enter into partnership, unless their constitution or objects forbid
NUMBER OF PARTNERS
The number of partners in a firm shall not exceed 20 and a partnership having more than 20 persons is illegal.
If the partnership is between the karta or member of Hindu undivided family the other members of the joint Hindu family will not be taken into account.
RESTRICTIONS ON AUTHORITY OF A PARTNER
Under the Partnership Act in the absence of any usage of trade to the contrary, the implied authority of a partner does not empower him to do the following acts:
Submit a dispute relating to the business of a firm to arbitration
Open a bank account in his own name
Compromise or relinquish any claim of the firm
Admit liability in a suit or proceeding against the firm
Withdraw a suit or proceeding on behalf of the firm.
Acquire immovable property on behalf of the firm
Transfer immovable property belonging to the firm.
Enter into partnership on behalf of the firm.
STATUS OF MINOR AS A PARTNER
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.
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 the accounts of the firm
Such minor’s share is liable for the acts of the firm, but the minor is not personally liable for any such act.
Such minor may not sue the partners for an account or payment of his share of the property or profits of the firm
It is not compulsory to register the firm. However there are serious effects of non-registration.
No suit to enforce a right arising from a contract or conferred by the Indian Partnership Act shall be instituted in any court by or on behalf of any person suing as 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 on the Register of firms as a partner in the firm
PROCEDURE FOR REGISTRATION
The registration of a firm may be effected at any time by sending by post or delivering to the Registrar of Firms 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, stating :the firm name