Court Order to Expel a Partner?

Consultant

Hi,

   Is it mandatory to get a court order to expel a partner?!

   Anyways, Kindly let me know what are the procedures / guidelines to GET A COURT ORDER TO EXPEL A PARTNER from a partnership firm.

 
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Advocate

Section44 DISSOLUTION BY THE COURT.

 

At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely :- (a) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business regard being had to the nature of the business; (b) that a partner, other than the partner suing, wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm of the conduct of its business; or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;

 
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Consultant

Hi Vishal,
 Thanks a lot for your immediate respond.

My Query is not about 'Dissolution of the Firm'. My question is about 'How to Register a Expel Partner in the Register of Firms'.

For instance, A,B and C are the partners of the firm.

A & B have decided to Expel the partner 'C' (without dissolution of the Firm) since for the reasons under that partner 'C' is:
(1) not actively involved in the said partnership,
(2) not participating in any of the General Boady meetings, (3) not invested any amount as agreed by him and also mentioned in the partnership deed and
(4) his code of conduct is not good.

A & B, being the continuing partners, sent 3 notices to attend the General Body Meeting as well as the Extraordinary General meeting conducted by them to show cause for the grounds above mentioned. But partner 'C' has not attended any of the meetings and not even responded.

Again, Parties A & B have sent legal notice drawn by an advocate by giving 1 month notice to show cause for the grounds above mentioned. But partner 'C' has not attended any of the meetings and not even responded for this as well.

So Partners, A & B, being the majority, expelled partner 'C' and given proper notice to him as per advocate's advise. The Advocate also advised the continuing partners to register the amended FORM-V along with all the notices sent to Partner 'C', in the Registrar of firms.

But in the Registrar Office, they'll be seeking Court Order for the same since the expelled partner has not singned in the FORM-V. However, he may not be. In Registrar office, the authority said they haven't dealt with any expulsion case so far and they may not knowing the procedures to register the expulsion case.

But our lawyer said that the continuing partners has to register the notices that they sent in Rs. 100 stamp paper and to notify the District Registrar (DR).

So that am asking you whether we need to get a court order to register the FORM-V (Reconstitution of firm) or is that sufficient to file the notices in Rs.100 stamp paper and forward it to the DR to file the amended FORM-V (A & B, be the continuing partners and C is the outgoing partner).

Appreciate your immediate respond.

Thanks in advance!
 

 
Reply   
 
Advocate

Dear Siva,

As explained earlier, under the provisions of the partnership act majority of the partners cannot expel any partner, reproduced below is the relevant section:

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 or 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.

 

 The option available to you is to mutually come to an agreement where the delinquent partner resigns himself or you will have to follow the following section of the partnership act:

Section44 DISSOLUTION BY THE COURT.

 

 

At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely :- (a) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business regard being had to the nature of the business; (b) that a partner, other than the partner suing, wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm of the conduct of its business; or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;

The third option will be setting up an arbitration panel and resolve the issue.

 
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Consultant

Dear Vishal,

  Thanks a lot for your valuable suggestions.

Regards, Siva

 
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Advocate

siva:

Please ignore S 44, however explusion is possible only if there is a power between the partners in the contract to do so and the explusion must be done in good faith. Further, I am not too sure whether you need to approach the court or not, but the act is clear that there is no such provision to approach the court to have the form V registered only on the order of the court.

 
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Consultant

Dear Vishal,

  I really appreciate your immediate respond.

Our intension is not expel anyone but unfortunately, the circumstances are happening like that. We've given almost a year (or enough time) to the third partner 'C' to invest his said amount as mentioned in the deed but yet he didn't invested a single ruppee which makes him irregular in the business. Also, we heard that he has stolen some amount in the other businesses he involved, which makes us fear to continue businness with.

In this regard, we've given prior notices properly as mentioned in my earlier statement but yet there's no response from his side. Also, we requested him to sign the FORM-V / FORM-C but refused to sign. So we're now constrained to expel him.

Kindly advise us how to go forward.

Thanks, again!!

Warm Regards - Siva

 
Reply   
 
Advocate

Siva:

Your intentions may be true, but you should be in a position to prove the allegations you are making, if you can prove those, I suggest you go ahead with the expulsion and give a notice of the same in the local newspaper and impress upon the RO of Firms to accept the unsigned Form V

 

 
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Consultant

Dear Vishal:

  Will do the same.

Thanks a ton, again!!

Regards- Siv

 
Reply   
 
Consultant

Hi Vishal,
  Kindly let me know the legal format/words to give PUBLIC NOTICE about partnerretirement in any English Newspaper.
 
Thanks in advance!
 
Regards, Siva
 
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