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CS Pooja (Company Secretary)     29 May 2009

Can a Company be a partner under Indian Partnership Act,1932

Can a public limited company be a partner???

Any case laws in support of the same???



Learning

 17 Replies


(Guest)

A partnership between companies is termed as 'Joint Venture'. 

CS Pooja (Company Secretary)     29 May 2009

Thank u, Mr. Subramanium, for your prompt reply.

But, in case two or more individuals and a Company want to enter into partnership....


(Guest)

As per Partnership Act's definition 'A partnership is the relation between persons who has agreed to share the profits of business carried on by all or any of them acting for all'.  Though, a company is an artificial person, as per Partnership act's Section 9 (General duties of a partner), 'partnerers  must be faithful to each other', as such a company being run by multiple persons cannot fulfill this criteria. 

An interesting question.  more views from  experts are requested.

 


(Guest)

For your second querry :-  It can be done in the form of 'MOU (Memorandum of Understanding).  

 


(Guest)

Kindly read 'partnerers'  as 'partners' (speed caused typing/spelling mistake).


(Guest)

 Whether a company can enter into a partnership or not is no longer open to doubt. The Deptt. of Company Affairs has in its Circular No. 1-81 (20-1-81-CL-V),

dated 14-9-1981 expressed the following view: "A question has been raised whether an incorporated company can enter into a partnership with some other

person or some other company. The matter has been examined by this department in consultation with the Department of Legal Affairs and I am directed to say

that prima facie a company entering into a partnership with some other person or some other company would be ultra vires and will be against the principle that

a particular company or an incorporated body cannot lawfully employ funds for purposes not authorised by its constitution which would normally be the

memorandum and the articles of association. However, a company or an incorporated body, if so authorised by its constitution, can enter into partnership with an

individual person or with another company irrespective of nationality and residence. This would, however, require the company to adopt very special articles

since many of the provisions of the Partnership Act would be difficult to apply to such a partnership. In view of this, while considering applications for

registration of firms with bodies corporate as partners under the Indian Partnership Act, 1932, the State Governments should examine the applications before

them and find out whether the memorandum and articles of association of the applicant incorporated companies contain any special articles which authorise the

incorporated companies to enter into partnerships and the articles also take care of the possible anomalies which have been pointed out in the Calcutta High

Court's ruling in the case of Ganga Metal Refining Company P. Ltd. v. Income-tax Commissioner West Bengal, (1968) 38 Com Cases 117 : AIR 1967 Cal 429."


(Guest)

 this should suffice to ur query........Regards,

1 Like

Sivadas Chettur (Chartered accountant)     25 August 2009

A limited company whether public or private is a legal person capable of entering into valid contracts including partnership agreements. Thus there is no legal bar. The company can authorise a person to attend the meetings of the partners and to generally represent the company in other matters relating to the management and administration of the firm.

Sivadas Chettur (Chartered accountant)     25 August 2009

A limited company whether public or private is a legal person capable of entering into valid contracts including partnership agreements. Thus there is no legal bar. The company can authorise a person to attend the meetings of the partners and to generally represent the company in other matters relating to the management and administration of the firm.

sivadas chettoor B.COM FCA LL.M

siva208@yahoo.com

Ruchesh Sinha (Lawyer)     08 October 2009

Hello,

I agree with Mr. Sivadas Chettur, further adding to that the Partnership deed registered  should also contain a special clause to this effect. So as to ensure more clarity and to avoid the legal chaos.

rohit (cfo)     09 November 2009

gud question..but u c dat  in partnership liability of partners is unlimited but in company it it limited

Dr. Sharad Garg (Associate Professor)     22 November 2009

It is the liability of members which is limited in a limited company, and not that of the company itself. The liability of a limited company itself can be or rather is always unlimited. Being separate legal entity a Ltd. co. can enter into a partnership with other individual partners.  

Sivadas Chettur (Chartered accountant)     22 November 2009

I wish to add a few lines. A company enters into a partnership as a single legal person and not as a group of shareholders that company may comprise of. The word "person" is not defined under the Companies Act 1956 and therefore one can make a useful reference to Sec 3(42) of the General Clauses Act 1897 wherein it was defined to include a company as well.  

The Hon' Supreme Court in Bucha.F Guzdar AIR 1955 SC 74 held that an agreement of partnership between 3 companies is valid and consists of 3 partners.In Newstead v Frost the House of Lords also held that a partnership agreement between an individual and a company is valid.

Please not that the memmorandum of assn of the company must authorise the entering into partnership lest it becomes ultra vires and void. But for these matters the partnersip is absolutly valid. The company as a partner assumes unlimited liability but limited to the extent of assets answerable for the debts of the company.

Please also note that a firm cannot be a member of the company.

siva208@yahoo.com

Sivadas Chettur (Chartered accountant)     22 November 2009

Please note that The Hon Supreme Court in Bacha.F.Guzdar's case held that a partnership consisting of only 3 companies as aprtners is valid. Like wise House of Lords in Newsteed v Frost also held that a company can be a partner in a firm. But the partnership should be authorised by the Memmorandum lest it will be ultra vires. A firm cannot be member in a company.Please also note that in the abscence of a definition of the term "person" under the companies act the defn under the General clauses Act 1897 shall apply. Thus the defn under the 1897 Act includes a company also.

siva208@yahoo.com


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