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Prakash Yedhula (Lawyer)     04 May 2009

Some important judgments under Partnership Act, 1932


Partnership Act, 1932, Section 14 - Partnership property - Property used for partnership purposes is necessarily not the partnership property - Property belonging to a partner does not become partnership property by being used for the purpose of partnership - There must be some evidence of an intention to treat the property as a part of the capital of the business - Where a partner brings certain property into the common stock as part of his capital, it becomes partnership property - Act has also specifically included the goodwill among the partners of the firm subject to any contract between the partners, in all accounts for determining the shares. (M/s.D.R.Associates Vs General Manager, East Coast Railways & Ors.) 2005(1) Civil Court Cases 328 (Orissa)

Partnership Act, 1932, Sections 16, 37 and 50 - Partnership firm - One of the partners died and the firm stood dissolved - New partnership firm constituted in which new partners introduced - Held, surviving partner is liable to render accounts till the date on which the firm stood dissolved. (Smt.Sarojini, LRs. of Deceased 1st defendant Vs Kumari Bhagyavathi & Ors.) 2005(3) Civil Court Cases 327 (Madras)

Partnership Act, 1932, Sections 20, 22 - Firm and its partners - Liability - A partnership firm has no independent entity of its own and all the liabilities against the firm or all acts done by any one of its partners for and on behalf of the firm shall bind all the other partners as well - Section 20 is an exception to the implied authority - Partners by contract between themselves extend or restrict the implied authority of any partner - However, notwithstanding any such restriction, any act done by a partner on behalf of the firm, which falls within his implied authority, binds the firm, unless the person with whom he is dealing knows of the restriction or does not know or believe that partner to be a partner - Onus to prove that such authority of partner is restricted is upon the person who claims such a restriction. (State Bank of India Vs M/s.Simko Engineering Works) 2005(1) Civil Court Cases 319 (P&H)

Partnership Act, 1932, Section 24 - Partnership firm - Partner is an agent of the firm - Notice to agent tantamounts to the principles and vice versa - Notice to a principal is notice to all his agents and notice to an agent of matters connected with the agency is notice to his principal. (Ashutosh Vs State of Rajasthan & Ors.) 2005(2) Apex Court Judgments 657 (S.C.) : 2005(3) Civil Court Cases 606 (S.C.)

Partnership Act, 1932, Section 25 - Partnership firm - Liability of partners - It is joint and several - A creditor of the firm can recover the debt from any one or more of the partners - Each partner is liable as if the debt of the firm has been incurred on his personal liability. (Ashutosh Vs State of Rajasthan) 2005(2) Apex Court Judgments 657 (S.C.) : 2005(3) Civil Court Cases 606 (S.C.)

Partnership Act, 1932, Sections 32(3), 72 - Partnership firm - Retiring partner - Public notice as required u/s 72 of the Act not given - Held, a retiring partner is liable for any subsequent act on behalf of the firm which would bind the firm until the public notice as prescribed by Section 72 is given. (Harihar Davey Vs Kamlesh Steel Enterprises & Ors.) 2005(3) Civil Court Cases 774 (Madras)

Partnership Act, 1932, Section 42 - Partnership - Dissolution and reconstitution - Two different legal concepts - Dissolution puts an end to the partnership, but reconstitution keeps it subsisting, though in another form - Dissolution followed by some of the erstwhile partners taking over the assets and liabilities of the dissolved partnership and forming themselves into a partnership is not reconstitution of the original partnership - Partnership formed after dissolution is a new partnership and not a reconstitution of the old partnership - A reconstitution of a firm denotes a structural alteration of the membership of the firm, by addition or reduction of members and an incidental redistribution of the shares of the partners. (P.N.Shanmugam & Anr. Vs P.D.Vadivelu & Anr.) 2006(4) Civil Court Cases 660 (A.P.)

Partnership Act, 1932, Section 44(d), Civil Procedure Code, 1908, Order 20 Rule 15 - Partnership at will - Court can dissolve the firm if meeting of partnership was never held after execution of the partnership deed in spite of repeated requests by plaintiff, managing partner did not show him the accounts and confidence between the partners i.e. plaintiff on the one hand and defendant on the other found lost. (P.N.Shanmugam & Anr. Vs P.D.Vadivelu & Anr.) 2006(4) Civil Court Cases 660 (A.P.)


Partnership Act, 1932, Section 44(d), Civil Procedure Code, 1908, Order 20 Rule 15 - Suit for rendition of accounts - Managing partner if stated in evidence that firm has been dissolved and fresh partnership is constituted, it amounts to dissolution by notice on the date of deposition - Court can grant relief of dissolution of firm even if plaintiff has not asked for it and order rendition of accounts prayed for. (P.N.Shanmugam & Anr. Vs P.D.Vadivelu & Anr.) 2006(4) Civil Court Cases 660 (A.P.)

Partnership Act, 1932, Section 69, 63 - Partnership firm - Registered - Inducting a new partner - Changes in the constitution of the Firm do not change registration once made - Fresh registration need not be applied and obtained - However, changes made have to be notified to the Registrar u/s 63(1) of the Act - Default made by firm in not so notifying is not of relevance in considering the question of the maintainability of the suit u/s 69(2) of the Act. (P.N.Shanmugam & Anr. Vs P.D.Vadivelu & Anr.) 2006(4) Civil Court Cases 660 (A.P.)


Partnership Act, 1932, Section 69 - Partner - Forcible breaking lock of shop of partnership firm and taking away certain articles lying therein - Suit for damages - Such suit is not a suit for enforcing right arising out of contract or for enforcing a right conferred by Partnership Act - Such suit is essentially a suit for damages for misconduct and is not barred by Section 69 of the Act. (Chandrayya Mutwayya Irabatti Vs Sidram Ganpat Ingale) 2006(1) Civil Court Cases 600 (Bombay)

Partnership Act, 1932, Section 69 - Unregistered partnership firm - Suit by - Registration of firm during pendency of suit - Bar under Section 69 does not apply. (M/s Samyuktha Cotton Trading Co. Vs Bheemineni Venkata Subbaiah & Ors.) 2005(1) Civil Court Cases 501 (A.P.)

Partnership Act, 1932, Section 69(2) - Partnership firm - Registration of firm after filing the suit - Cures the initial defect provided the bar of limitation does not come in - Even fresh suit on the same cause of action is permitted. (M/s. IBP Company & Anr. Vs M/s. Uday Singh Jeet Ram & Ors.) 2004(3) Civil Court Cases 699 (P&H)


 9 Replies

Swami Sadashiva Brahmendra Sar (Nil)     04 May 2009

Thanks mr prakash for posting useful case laws !

Y V Vishweshwar Rao (Advocate )     05 May 2009

Thank Your sir for useful Citation

Saifullah.C (Advocate,Chennai)     10 May 2009

Thankx learned Brother Mr.Y.Prakash for posting useful and beneficial judgements.

a.manoharan (Advocate 94431 45884     11 May 2009

thanks , useful and very good effort for posting judgements

Aftab Bharmal (Developer)     28 February 2011


    I would like to know that. in section 43 sub section 1) and 2)

  What is the process to execute dissolution using section 43. for partnership at will.  Do we need to get  reasons for dissolution if are not feeling comfortabe to carry on the buissness with the partners.  ??





ambrish (service)     03 March 2011

Very good study material posted sir...

Ambrish Tiwari,

Satya Narayana Palukuru (Advocates & Mediators.)     03 March 2011

Thanks Prakashji.

A good input for a advocate

Surrender K Singal   28 August 2011

Some useful citations by Expert Mr. Prakash;

Carrying on of new business by family of one partner from a (undissolved-partnership) premises without involvement of other partners; a) Against the spirit / faith / trust of existing partnership; b) Partners' Entitlement to Profits of such new business; c) determination / suspension of such business activities; d) would costs / damages / mesne profits become due from the family running such new business for personal gains ? What is the course of action to be advised to such suffering partners whose common premises/goodwill etc being misused by only one partner, detrimental to partnership business ?

Chandran Baloo (Proprietor)     20 January 2012

Dear Mr.Prakash

Your points are very informative.

In a partnership firm formed by a Proprietor and another, what happens when:

1. Property in the form of land purchased in the name of the concern prior to the signiing of the partnership deed, with the Khatha Papers and other related purchase documents nameing only the concern's name - represented by the the individual - now got into the books of the Partnership firm with no mention of the assests - as the Partner's share.  The Partnership firm then builts a building on this land and the entire expenses and assests is shown in the balance sheet for 5 years.  Can the first Partner now mortgage the land papers with the bank, without the knowledge of the other joint Partner ?  Can we have the Bank held responsible if a mortgage of such type is done, as the first partner has signed the loan documents as Prop. and shown the property papers that bears only the concern's name and he as the sole reperesentative.

2.  Is it mandatory to inform the Sub-Registrar's office on the change of the nature of the company - prop  to Partnership?

3.  The Partnership firm has a running account with the same bank in the same branch, when they have gone ahead to mortgage the property as sited above.  Isn't it mandatory for any bank to review the balance sheets of the concern in who's name the property is, ascertain the status of the firm and credibility of the person / concern for repayment of loan sanctioned ?

4.  The Partnership Deed has the Arbitration clause, to resolve the disputes between the Partners. The second partner now wishes to proceed with an Arbitrator.  Can he emphasise that the property be got into the case for valuation and settlement of accounts, clear from all encumbrances - meaning to say that the first partner has to clear the liabilities with the bank and withdraw the property papers before the case can proceed with the Arbitration.

How do we proceed with this case and if there are any rules in the Partnership Act / Arbitration Act / Criminal or Civil Act to resolve the issue may please to replied.

Thanking in advance.

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