Relations of Partner Unit 2[Part 3/3]

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1 Relations of Partner Unit 2[Part 3/3] CPT MERCANTILE LAW CHAPTER -3 THE INDIAN PARTNERSHIP ACT,1932 CA. DIPTI LUNAWAT

2 Learning Objectives Rights of Transferee of a partner s Share [Sec.29] Legal Consequences of Partner Coming in or Going Out [ Sec. 31 to 38]

3 Rights of Transferee of a Partner s Share [Sec.29] A partner may transfer his share like any other property by sale, mortgage. Continuance of partnership Dissolution or Retirement of Transferring Partner

4 Continuance of Partnership Entitled Not Entitled Receive Share of Profits Account of profits agreed Interfere in Conduct of Business Require Accounts Inspect books of Accounts

5 Dissolution or Retirement of Transferring Partner Share of Assets of Transferring Partner Accounts as from date of dissolution For Ascertaining his share

6 Legal Consequences of Partner Coming in or Going Out [ Sec. 31 to 38] Introduction of a partner [Sec.31] Retirement of a partner [Sec.32] Expulsion of a partner [Sec.33] Insolvency of a partner [Sec.34] Death of a partner [Sec.35] Rights of Outgoing partner [Sec.36] Revocation of Continuing guarantee due to reconstitution of firm [Sec.38]

7 Introduction of a partner [Sec.31] A person can be admitted as a partner With consent of all partners Contract between existing partners

8 Introduction of a partner [Sec.31] Liability of Partner for Firm s Act From date of admission Liable for acts done before Admission Minor on attaining majority New Firm assumes liabilities of old firm Creditors accepts new firm [Novation] Liable for acts since he was admitted as partner

9 Retirement of a partner [Sec.32] Retirement of a partner Consent of all partners Express agreement Partnership at will [ By notice]

10 Retirement of a partner [Sec.32] Liability of Partner for Firm s Act Retirement Liable for acts done before Retirement Liable for acts done After Retirement Discharge through novation Tripartie agreement. [Firm, Third party, Retiring Partner] Till Public Notice is Given

11 Rights of Retiring Partner [Sec.36 & 37] Right of Outgoing partners Carry on Competing business[sec.36] Share Subsequent Profits[Sec.37] Without Using Firm Name Solicits Old Customer s Share in subsequent profits of Firm Or Interest at 6% Till accounts are finalized

12 Insolvency of a partner [Sec.34] Insolvent partner cannot continue as a partner Ceased to become partner from date of order of adjudication Estate is not liable for acts of firm after date of order of adjudication Firm not liable for act of insolvent partner after date of order of adjudication

13 Expulsion of a partner [Sec.33] Expulsion Express power Majority Good faith If, otherwise expelled Expulsion is Null & Void.

14 Expulsion of a partner [Sec.33] Interest of Firm Test of Good Faith Notice Opportunity

15 Death of a Partner [Sec.35] Dissolution of Firm No liability after death No public notice

16 Revocation of Continuing Guarantee by Change in Firm [Sec.38] Guarantee extending to series of Transactions Revoked due to change in Constitution of Firm By agreement, can be changed

17 Questions MCQ Questions

18 Question No.1 A person may be admitted as a new partners: A] In accordance with a contract between the existing partners or with the consent of all the existing partners B] In accordance with a contract between the existing partners or with the consent of all the existing partners subject to the provisions of section 30 of the Act. C] After obtaining specific approval of the Registrar of Firms & Societies to this Act. D]By simply taking the consent of the new partner Ans B

19 Question No.2 A Partner may retire with the consent of: A] Majority of the Partners B] Senior partners C] All other Partners D] None of These Ans C

20 Question No.3 A Partner may retire from an existing firm: A] with the consent of all partners B] as per express agreement C] by written notice in partnership at will D] all of the above. Ans D

21 Question No.4 For firm s acts after retirement, a retiring partners:- A] is not liable to third party even if no public notice is given of his retirement. B] is not liable to third party who deals with the firm without knowing that he was a partner even if no public notice is given of his retirement. C] Continues to be liable to every third party (whether or not having knowledge that he was a partner) if no public notice in give. D] None of these Ans B

22 Question No.5 Public notice of retirement must be given: A] Only by the retiring partner only. B] Only by any partner other than retiring partner. C] By retiring partner or any of the other partners. D] none of these. Ans C

23 Question No.6 After retirement from firm, which of the following partners is not liable by holding out, even if the public notice of retirement is not given: A] Active Partners. B] Sleeping Partners. C] Representative of deceased partner. D] Both (B) and (C) Ans D

24 Question No.7 Death of partner has the effect of A] Dissolving the firm B] Result in continuance of the business of the firm. C] His heirs joining the firm D] Computation of profits upto the date of death. Ans A

25 Question No.8 The heir of the deceased partner: A] Has a right to become a partner in the firm of the deceased partner. B] Does not have a right to become a partner in the firm of the deceased partner. C] Can become a partner in the firm of the deceased partner only if the surviving partners give their consent in this regard. D] Both (B) & (C) Ans D

26 Question No.9 A partner can be expelled from a firm only with the consent of: A] All other partners. B] All senior partners. C] Majority of the partners. D] None of these. Ans C

27 Question No.10 The partner who has been wrongly expelled has a right: A] to recover damages for wrongful explusion B] To claim re-instatement as a partner. C] Both (a) and (b) D] None of these. Ans B

28 Question No.11 A partner may be expelled from the firm on the fulfillment of the condition that the explusion power is exercised A] As given by express contract B] By majority of partners. C] In absolute good faith. D] All of the above. Ans D

29 Question No.12 The test of good faith as required under section 33(1) includes the followings: A] That the expulsion must be in the interest of the partnership. B] That the partner to be expelled is served with a notice. C] That the partner to be expelled is given an opportunity of being heard. D] All of the above. Ans D

30 Question No.13 In case of insolvency of a partner: A] He cease to be a partner on the date on which an application for insolvency is made. B] His estate is liable for firm s acts done after the date of the order if no public notice is given. C] The firm is dissolved unless otherwise agreed. D] None of these Ans C

31 Question No.14 A Share in a partnership: A] Can be transferred in accordance with the terms and conditions contained in the partnership deed. B] Can be transferred only if all the partners agree for such transfer C] Cannot be transferred at all D] Can be transferred through the recognized stock exchanges. Ans B

32 Question No.15 As per Section 29 of the Indian Partnership Act, 1932 a partner may transfer his interest in the firm Ans D A] By Sale B] By mortgage. C] By Change D] All of the above

33 Question No.16 A transferee of a partner s share is: A] Entitled to interfere with the conduct of the business. B] Entitled to require accounts. C] Entitled to inspect the books of the firm. D] Bound to accept the account of profits agreed to by the partners. Ans D

34 Question No.17 A continuing guarantee: A] is revoked as to future transactions from even the date of any change in the constitution of the firm. B] is not revoke as to future transaction even in case of change in the constitution of the firm C] none of these. Ans A

35 Questions Case Law Based Questions

36 Question No.1 A,B,C and D were partners in a firm. One of the terms of partnership deed was that A could introduce into partnership any of his sons on their attaining the age of 18. A s son attained the age of 18 and he proposed to make him a partner. C and D objected to admission of A s son. Is admission of A s son justified? YES

37 Question No.2 X,Y and Z are partners. Z gives notice of retirement to the other partners but does not give public notice of it. W gives credit to the firm without having notice of the change. Can W sue Z if (a) Z is an active partner (b) Z is a dormant partner (sleeping partner)? YES NO

38 Question No.3 X, Y and Z are partners. Z gives notice of his retirement to other partner but does not give public notice of it. Z and Y admit P and continues business in the old name. W gives credit to the firm without having notice of the change? Can W sue X, Y, Z and P jointly? NO

39 Question No.4 X, Y and Z are partners sharing the profits in the ratio of 3:4:1 X becomes bankrupt and Y and Z continued the business without settling accounts with his estate. X s estate claims 3/8 th of the profits made from the date of A insolvency? Will this claim sustain? YES

40 Question No.5 X, Y and Z are partners. On , Z applies for insolvency. On , he endorses a Bill of Exchange in favour of W. On he is declared insolvent Does W acquire a good title to the Bill? YES

41 Question No.6 X, Y and Z are partners. The firm ordered goods. Thereafter X died. The delivery of the goods was made after Z s estate liable for the debt? NO

42 Question No.7 A became surely to the firm of NC Mookerji for B s conduct as cashier to the firm. The constitution of the firm subsequently underwent a change. Two sons of N. Mookerji were admitted as partners and its name was altered to N Mookerji and Sons. Subsequently B defalcated. Is A liable for B s defalcation? NO

The Partnership Act, 1932

The Partnership Act, 1932 (Act No.IX of 1932) Contents Sections Particulars Preamble 1 Short title extent and commencement. 2 Definitions. 3 Application of provisions of Act IX of 1872. 4 Definition of