Rights and duties of partners
Sections 9 & 10 of the Act
lay down the basic duties of every partner and the said duties are not subject
to any contract to the contrary. Therefore, partners are bound to carry on the
business of the firm to the greatest common advantage, to be just and faithful
to each other and to render accounts and full information of all things
affecting the firm to any partner or his legal representative and every partner
is bound to indemnify the firm for any loss caused to it by fraud in the
conduct of the business of the firm.
Subject to this the mutual rights and duties
of partners may be decided by contract between the partners, either express or
Subject to any contract to the contrary such
duties and rights of each partner are provided in sections 12 and 13 of the
partner has a right to take part in the conduct of the business,
partner is bound to attend diligently to his duties in the conduct of business.
difference arising as to ordinary matters connected with the business may be
decided by a majority of partners and no change in the nature of the business
shall be made without the consent of all the partners,
partner has a right to have access to and to inspect and copy any books of the
partner is not entitled to receive remuneration for taking part in the conduct
of the business,
partners are entitled to share equally in the profits earned and shall
contribute equally to the losses sustained by the firm,
the partner is entitled to interest on the capital subscribed by him, such
interest shall be payable only out of the profits a partnership making, for the
purpose of the business, any payment or advance beyond the amount of capital he
has agreed to subscribe, is entitled to Interest thereon at the rate of 6% per
shall indemnify a partner in respect of payments made and liabilities incurred
ordinary and proper course of conduct of the business and
such act in an emergency, for the purpose of protecting the firm from any loss,
as would be done by a person of ordinary prudence, under similar circumstances,
partner shall indemnify the firm from any loss caused due to his wilful neglect
in the conduct of the business of the firm.
These rights and duties will be implied in
the partnership unless the partnership agreement provides to the contrary i.e.
makes any variation in the said rights and duties.
Similarly, subject to a contract to the
contrary, if a partner derives any profit for himself from any transaction of
the firm or from the use of the property or business connection with the firm
or the firm name he is liable to account for the profit and pay it to the firm,
and if the partner carries a business of the same nature as and competing with
that of the firm, he shall account for and pay to the firm all profits made by
him in that business.
Property of partnership
The property of a partnership firm will
consist of all the assets, moveable and immoveable brought in by any or all the
partners into the firm and also include the goodwill.
As to what is goodwill see Introductory Note
to Ch. 3 Part III. It may be stated that relying upon the specific provision
of s. 22 of the English Partnership Act, 1890, the Supreme Court has held
that all property of a partnership firm, whether moveable or immoveable is
moveable property. and therefore, on retirement of any partner or dissolution
of partnership the division of even immoveable property among the partners does
not amount to transfer of property and the deed of retirement or dissolution
does not require registration.
The Supreme Court has not considered the law
of vesting and divesting of interest in an immoveable property. A property
acquired by A by purchase or otherwise is vested in him and even if A brings
that property into partnership and it is used for the partnership business, the
property is not automatically divested from A and vested in A and his other
Vesting and divesting can take effect only by
act of parties or by operation of law, and, therefore, the property brought in
by A cannot become vested in the other partners unless there is a regular
transfer of the property by A to himself and other partners. And similarly if
property vested in the partners is divided, among them, it amounts to transfer
of one partner's interest to the other, and such transfer is necessary to vest
and divest the title from one to the other.
Even in English law, inspite of the
provisions of Partnership Act above referred to, the conveyancing practice is
to effect the transfer of property brought in or taken out of the partnership
by a Deed of Conveyance.