Practical Problems_Partnership Act_14

A, B and C are partners in a Partnership firm. They were carrying their business successfully for the past several years. Spouses of A and B fought in ladies club on their personal issue and A's wife was hurt badly. A got angry on the incident and he convinced C to expel B from their partnership firm. B was expelled from partnership without any notice from A and B. Considering the provisions of Indian Partnership Act, 1932 state whether they can expel a partner from the firm?

Practical Problems_Partnership Act_13

A, B, and C are partners in a trading firm. A ,without the knowledge or consent of B and C, borrows Rs. 10,000 from D, a customer of the firm, in the name of the firm. A then buys some goods for his personal household use with that borrowed money. Can D hold B and C liable for the loan?

Practical Problems_Partnership Act_12

‘A’ and ‘B’ are carrying on the business of grain merchants, in partnership. It is provided in the partnership deed that disputes relating to the affairs of the business would be preferred to arbitration. Arbitrators decided in favour of ‘A’. ‘B’ refuses to abide by the award. ‘A’ sues for enforcement of the award. Incidentally the firm is not registered under the Indian Partnership Act. Can A file case in this situation ?

Practical Problems_Partnership Act_11

‘A’ and ‘B’ carry on motor repair business in partnership. Under the deed of partnership, ‘A’ has no power of borrowing money. ‘C’ a creditor, knowing nothing about restrictions on the power of ‘A’ for borrowing money, lends ‘A’ money for the use of the firm. Is the firm liable to ‘C’ for repayment of the money lent by him to ‘A’. Refer to statutory provisions and decided cases.

Practical Problems_Partnership Act_10

An unregistered partnership issued a cheque which bounced. On a complaint by the payee of the cheque the offence was taken cognizance of under section 138 of the Negotiable Instruments Act, 1881. The partnership assailed the summons before the High Court. Is the action of the unregistered partnership correct in law?

Practical Problems_Partnership Act_9

Ajit, Baljit and Charanjit are partners in a firm carrying on money lending business. Daljit, a customer, deposits his jewellery with the firm for safe custody. Ajit and Baljit sell this jewellery and misappropriate the money. Charanjit, being a sleeping partner, has no knowledge about this sale. Now, Daljit files a suit against all the three partners. Can Charanjit be held liable ? Give reasons.

Practical Problems_Partnership Act_8

A, B, C, D and E are partners in a firm. They decided to dissolve the firm from 1st January, 2006 but failed to give a public notice of its dissolution and continued the business of the firm even after that date. D died on 5th January, 2006 and E was declared insolvent on 10th January, 2006. On 11th January, 2006, A borrowed in the firm’s name Rs.20,000 from R who was ignorant of the dissolution. Discuss the liability of partners.

Practical Problems_Partnership Act_7

A, B, C and D are partners in a firm which has not been registered. A is wrongfully expelled from the firm by the other partners. Can he successfully bring a suit' against the other partners for damages for wrongful expulsion and declaration that he continues to be a member of the firm? What remedies if any are open to A?

Practical Probelms_Partnership Act_6

Rohit is not a partner in a particular firm. But, he represents himself or knowingly permits himself to be represented as a partner of that particular firm to Sanjay, who on the faith of such a representation gives credit to the firm. Is Rohit liable as a partner in the firm ?

Parternship Act_Practical Problems_5

A, B and C are partners in a firm called ABC. A, with the intention of deceiving D, a supplier of office stationery, buys certain stationery on behalf of the ABC firm. The stationery is of use in the ordinary course of the firm's business. A does not give the stationery to the firm, instead brings it to his own use. The supplier D, who is unaware of the private use of stationery by A, claims the price from the firm. The firm refuses to pay for the price, on the ground that the stationery was never received by it. Decide

(i) Whether the firm's contention is tenable?
(ii) What would be your answer if a part of the stationery so bought by A was delivered to the firm by him, and the rest of the stationery was used by him for private use, for which neither the firm nor the supplier D was aware?
(iii) Explain the provisions of the Indian Partnership Act in this regard.

The given problem relates to 'implied authority' of a partner. Sections 19 and 22 of the Partnership Act deal with the subject of implied authority of a partner. The two Sections when read together provide that the act of a partner which is done to carry on, in the usual way business of the kind carried on by the firm, binds the firm, provided the act is done in the firm's name, or in any manner expressing or implying an intention to bind the firm.

Besides, every partner is in contemplation of law the general and accredited agent of the partnership and may consequently bind all the other partners by his acts in all matters which are within the scope and objects of the partners. Considering the aforesaid provisions and explanation, the questions asked in the problem may be answered as under:

(i) The firm's contention is not tenable, for the reason that the partner in the usual course of the business has an implied authority to bind the firm. The firm is, therefore, liable for the price of the goods.

(ii) In the second case also the answer would be the same as above, i.e., the implied authority of the partner binds the firm.

(iii) It is explained above.

Parternship Act_Practical Problems_4

A and B purchased a taxi to ply in partnership. They plied the taxi for a year when A, without the consent of B, disposed of the taxi. B brought an action to recover his share in the sale proceeds. A resisted B's claim on the ground that the firm was not registered. Will B succeed in his claim?

Yes- B will succeed in his claim. Although under Section 69 of the Partnership Act, a partner of an unregistered firm cannot enforce any of his contractual or legal rights against any other partner but non registration of a firm does not affect a partner's right to seek settlement of accounts of a dissolved firm. In this given case, the taxi having been sold, the business of the firm has already been dissolved. B shall thus, be entitled to claim his share in the sale proceeds.

Parternship Act_Practical Problems_3

Anand and Ravi are carrying on business in partnership. In the partnershipdeed, it is provided that none of the partners should borrow money except with theconsent of both. Anand borrowed a sum of Rs. 1,000 from Suresh for the business ofthe firm without the consent of Ravi. Is the firm liable? Give reasons for your answer.

The problem relates to the authority of a partner. According to Section 19 of the Partnership Act, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. Now, the question that may arise is that where a specific restraint has been put on a partner's authority, will such a restraint affect the partner's implied authority to bind the firm.

In this regard. Section 20 provides that the partners in a firm may, by contract between themselves, extend or restrict the implied authority of any partner. But, in so far as third parties are concerned, the firm continues to be liable to him for any such act which falls within the scope of the implied authority of a partner unless the person, with whom the partner is dealing, knows the lack of authority of the partner. Thus, in the given case, since Anand borrowed money for business purposes (and in a trading firm, power to borrow money falls within the usual course of business and hence implied power of a partner), the firm shall be held liable to Suresh.

Parternship Act_Practical Problems_2

D, J and A are only partners in a firm. They decide to dissolve the partnership with effect from 1st April, 1988. The partners do not give a public notice of the dissolution, but continue the business. During the course of business, D, J and A endorse certain Bills of Exchange of the partnership to a third party M, who was not aware of the dissolution. M, the third party, had supplied certain stationery to the firm. The Bills of Exchange are dishonoured. The third party M wants to claim the money. Decide:

(i) Whether the firm will be liable to pay for the bills of exchange?
(ii) What are the provisions of the Indian Partnership Act in this regard?

The problem is based on the provisions of Section 45 of the Indian Partnership Act. The Section provides that notwithstanding the dissolution of a firm, the partners continue to be liable as much 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 of the dissolution is given.

Therefore, the firm shall be liable on the bills, as no public notice was given by the partners regarding dissolution of the firm. Similar view was expressed in Robinson's case also.

Parternship Act_Practical Problems_1

A and B, co-owners of a house, let it to a paying guest. They divide the net rents between them. Are they partners?

No-A and B, are not partners since a very essential element that the partners must be engaged in carrying some business is lacking. They could be partners if they make it their business to acquire houses jointly to rent out and share the net gains. Since it is the only house, they are the co-owners only—not partners.