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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 implied.

Subject to any contract to the contrary such duties and rights of each partner are provided in sections 12 and 13 of the Partnership Act.

They are

         every partner has a right to take part in the conduct of the business,

         every partner is bound to attend diligently to his duties in the conduct of business.

         any 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,

         every partner has a right to have access to and to inspect and copy any books of the firm

         a partner is not entitled to receive remuneration for taking part in the conduct of the business,

         the partners are entitled to share equally in the profits earned and shall contribute equally to the losses sustained by the firm,

         where 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 annum.

         the firm shall indemnify a partner in respect of payments made and liabilities incurred by him,

1.     in the ordinary and proper course of conduct of the business and

2.     in doing 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, and 

         the 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 partners.

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.

 


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