Partnership

A partnership is an arrangement where entities and/or individuals agree to cooperate to

advance their interests. In the most frequent instance, a partnership is formed between
one or more businesses in which partners (owners) co-labor to achieve and share
profits or losses.
Partnerships are also frequent regardless of and among sectors. Non-profit
organizations, for example, may partner together to increase the likelihood of each
achieving their mission. Governments may partner with other governments to achieve
their mutual goals, as may religious and political organizations. In education, accrediting
agencies increasingly evaluate schools by the level and quality of their partnerships with
other schools and across sectors. Partnerships also occur at personal levels, such as
when two or more individuals agree to domicile together. Partnerships between
governments, interest-based organizations, schools, businesses, and individuals, or
some combination thereof, have always been and remain commonplace.
Partnerships have widely varying results and can present partners with special
challenges. Levels of give-and-take, areas of responsibility, lines of authority, and
overarching goals of the partnership must all be negotiated. While partnerships stand to
amplify mutual interests and success, some are considered ethically problematic, or at
least debatable. When a politician, for example, partners with a corporation to advance
the corporation's interest in exchange for some benefit, a conflict of interest may make
the partnership problematic from the standpoint of the public good. Developed countries
often strongly regulate certain partnerships via anti-trust laws, so as to to inhibit
monopolistic practices and foster free market competition.
Among developed countries, business partnerships are often favored
over corporations in taxation policy, since dividend taxes only occur on profits before
they are distributed to the partners. However, depending on the partnership structure
and the jurisdiction in which it operates, owners of a partnership may be exposed to
greater personal liability than they would as shareholders of a corporation.
 TYPES OF PARTNERS:

Active partners:

The partners who actively participate in the day-to-day operations

of the business are known as active partners. They contribute

capital and are also entitled to share the profits of the business.

They also share the losses that the business faces.

Dormant partners:

Those partners who do not participate in the day-to-day activities

of the partnership firm are known as dormant or “sleeping

partners”. They only contribute capital and share the profits or

bear the losses, if any.

Nominal partners:

These partners “only” allow the firm to use their “name” as a

partner. They “do not” have any real interest in the business of the
 firm. They do not invest any capital, or share profits and also do

not take part in the business of the firm. However, they do remain

liable to third parties for the acts of the firm.

Minor as a partner:

In special cases a minor can be admitted as partner with certain

conditions. A minor can only share the profit of the business. In

case of loss his liability is limited to the extent of his capital

contribution for the business.

Provision related to rights and duties of partner:

Section-12.: The conduct of the business-

Subject to contract between the partners-

 a)Every partner has a right to take part in the conduct of the

 business.
  b) Every partner is bound to attend diligently to his duties in
 the conduct of the business.
 c) any difference arising as to ordinary matters connected
 with the business may be decided by a majority of the
 partners, and every partner shall have the right to
 express his opinion before the matter is decided, but no
 change may be made in the nature of the business
 without any consent of all the partners and
 d) every partner has a right to have access to and to inspect
 and copy any of the books of the firm .

 13) Mutual rights and liabilities –

 Subject to contract between the partners -

 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 a partner is entitled to interest on the capital
 subscribed by him such interest shall be payable only out
 of profits.
 a partner making, for the purposes 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 six per cent, per annum
 The firm shall indemnify a partner in respect of payments
 made and liabilities incurred by him.
 In the ordinary and proper conduct of the business,
 and
 In doing such act, in an emergency, for the
 purpose of protecting the firm from loss as would
 be done by a person of ordinary prudence, in his
 own case, under similar circumstances and
f) a partner shall indemnify the firm for any loss caused to it
by his willful neglect in the conduct of the business of the
firm

Rights of partner:

(1) Right to take part in the conduct of the Business :

Every partner has the right to take part in the business of the firm. This is because
partnership business is a business of the partners and their management powers are
generally coextensive. Now suppose this management power of the particular partners
is interfered with and he has been wrongfully precluded from participating therein. Can
the Court interfere in these circumstances? The answer is in the affirmative. The Court
can, and will, by Injunction, restrain other partners from doing so.
2)Right to be consulted: Where any difference arises between the partners with
regard to the business of the firm, it shall be determined by the views of the majority of
them, and every partner shall have the right to express his opinion before the matter is
decided. But no change in the nature of the business of the firm can be made without
the consent of all the partners [Section 12(c)]. A difference in opinon may relate either
to (1) an ordinary matter and (2)a fundamental matter.in case of of an ordinary matter
majority rights are consulted whereas in fundamental right ,consent of all partners is
must.

3. Right to remuneration: No partner is entitled to receive any remuneration in

addition to his share in the profits of the firm for taking part in the business of the firm.
But this rule can always be varied by an express agreement, or by a course of dealings, in
which event the partner will be entitled to remuneration. Unless otherwise agreed
,partners are not entitled to receive salary or remuneration for taking part in the conduct
of the business .section 13 (a) talks about it.the partnership agreement may ,however
provide for the payment of remunerations to working partner . a contract of services
stipulates two different persons whereas a firm and its partners are one and the same
thing .the so called remunerations paid to the partners is in reality a distributions of
profit.
4. Interest on Capital: The interest will be payable only out of profits. As a
general rule, interest on capital subscribed by partners is not allowed unless there is an
agreement or usage to that effect. The principle underlying this provision of law is that
regards the capital brought by a partner in the business, he is not a creditor of the firm
but an adventure.
5. Interest on advances: The partner is entitled to claim interest thereon @6%
per annum [Section 13(d)]. While interest in capital account ceases to run in dissolution,
the interest on advances keep running even often dissolution and up to the date of
 payment. Unless otherwise agreed ,partners are not entitled to any intrest on there
contribution to the capital.even where a partner is given the right to receive intrest on his
subscribed capital,such intrest shall be payable only out of profits ,section 13(c) talks
about where apartner is entitled to receive intrest on capital subscribed by him ,such
intrest shall be payble only out of profits.

6. Right to share profits: partners are entitled to share equally in profits earned
and so contribute equally to the losses sustained by the firm(section 13(b)),unless
otherwise agreed,partners are entitled to share equally in profits earned by firm, similarly
,they are bound to contribute equally in losses susutained in the courses of the business
of the firm.this would be so even where there is disproportionate capital contribution or
some of the partners render extra ordinary services.

7. Right to access the books of accounts: Every partner whether active or sleeping
is entitled to have access to any books of firm and to inspect and take out the copy
thereof(Sec12(d)),a partner may himselfor by his agent can access the book of accounts ,but
either can be to restrained from making use of the knowledge thus gained against the interest
of the firm .a partner can have the accounts inspected through the agent and need not to do
personally . for example a sleeping partner wanted to sell his intrest to the other partner and
authorized an expert valuer to inspect the accounts to ascertain the value of his intrest

8 Right to be indemnified: Every partner has the right to be indemnified by

the firm with respect of payments made and liabilities incurred by him in the ordinary
and proper conduct of the business as well as in the performance of an act in an
emergency for protecting the firm from any loss. (Section 13(e)) the act provide two
kinds of indemnity ,in the first place ,a partner is entitled to to recover from the firm
any expenses incurred by him “in the ordinary and proper conduct of the business “ and
the second kind of indemnity is recoverable when a partner has done an act involving
expenditure in order to protect the property of the firm from a loss threatened by an
emergency .it is necessary that the partner concerned should have acted as a reasonable
person would have acted in his own case.

9. Right to stop admission of a new partner:

Every partner has the right to stop the introduction of the new partner without the
consent of other partners.(section 31)

10. Right to retire:Every partner has the right to retire with the consent of other
partners and in the case of partnership at will, by giving notice to that effect to all other
partners.(section 32(1))
 11. Right not to be expelled: Every partner has got a right not to be expelled
from the firm by the majority of the partners.(Section33)

12. Right to dissolve the firm:Every partner has the right to dissolve the partnership
with the consent of other partners and in the case of partnership at will,by any partner giving
notice to that effect to all other partners.(section 40)

13.Right of outgoing partner to carry on competing business : An outgoing

partner can carrying on business competing with the firm and he may advertise such business,
but without using the firm name or representing himself as carrying on the business of the firm
or soliciting the custom of persons who were dealing with the firm before he ceased to be a
partner (Section36(1)).

14. Right of outgoing partner to share subsequent profits : When any

partner has died or ceased to be a partner, and the surviving or continuing partners carry on
the business of the firm with the property of the firm without any final settlement of the
accounts as between them and the outgoing partner, than at the representative option, can
either take the proportion of the profits attributable to the share of property or interest at the
rate of 6% per annum
Case laws-:
THOMAS VS ATHERTON:
T,the managing partner of a colliery ,received notice from l ,an adjoining owner
,that the working were being carried on beyond the boundary .t insisted that he
was entitled to the dispute ground , and carried on his working .the matter having
been referred to arbitration he was held liable to pay rs 6000 as damages as
trespass .his claim for contribution from his co-partners failed as the loss was not
suffered in the ordinary and proper conduct of the business.

BLISSET VS DANIEL:
The plaintiff was working in partnership with certain persons.it was proposed to
appoint one of the partner ‘s son as a co-manager of the firm .the plaintiff
objected .the aggrieved father complained to his partners behind the back of the
plaintiff and persuaded them to sign and serve upon the plaintiff anotice of
expulsion .this was done in the exercise of power which authorized a majority to
expel any partner without giving any reason.
CONCLUSION:

Whenever there is partnership formed ,there are certain rights and obligations of
partners ,so section 12 and section 13 have defined the rights and duties of partner
in Indian partnership act 1932,which gives certain rights to partners in partnership
which have been studies above,these rights are necessary as they are legal rights
and if a partner has not been provided with these rights then he can go to the court.
 NATIONAL LAW INSITUTE UNIVERSITY, BHOPAL

Project Work

on

THE RIGHTS OF PARTNERS

Submitted By -

DUSHYAN KAUL

Submitted To: - 2008 BA.LLOB-32

Prof.(Dr.) Ishaq Qureshi VII TRIMESTER

(Dr.) Sanjay yadav

Assistant professor of laW

TABLE OF CONTENT

PARTNERSHIP……………………………………………….. 1

TYPES OF PARTNERS………………………………………………………….2

PROVISION OF RIGHT AND DUTIES OF PARTNER……………………………..3

RIGHTS OF PARTNERS………………………………………….3

CASES ………………………………………………………………8

Conclusion……………………………………………………………. 9

Bibliography………………………………………………………….. 10
BIBLIOGRAPHY:
1 -WWW.GOOGLE.COM

2- AVTAR SINGH BOOK

3- WIKIPEDIA.COM

4-CLASS NOTES