Indian Partnership and Nature of Partnership Act " Partnership is the relation between persons who have agreed to share profit of business carried on by all or any of them acting for all."
Introduction
Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually partners and collectively a firm, and the name under which their business is carried on is called the firm name.
Partnership is the relationship between persons who have agreed to share the profits of a business that is carried on by one of them or all of them as per Sir Fredrick Pollock. The English Partnership Act, 1890 defines partnership as the relation subsisting between persons carrying on business in common with a view to profits. Indian Partnership Act is one of very old mercantile law. In 1932, the chapter XI of the Indian Contract Act, 1872 (Chapter IX – sections 239 to 266), was repealed and the Indian Partnership Act came into existence. The Act came into force on the 1st day of October 1932. The Act is not applicable to Jammu and Kashmir. The IPA was passed to define and amend the law relating to partnership. But it is not exhaustive on the topic of partnership as admitted in the Section 3 of the Act. There is nothing in the Act that implies that the Act should be given a retrospective effect.
Define Patnership and give its essentials
According the partnership Act 1932 it is defined in the following words :
" Partnership is the relation between persons who have agreed to share profit of business carried on by all or any of them acting for all."Partnership is a mean of bringing together the persons who can contribute capital, skill for the expansion of business. In the ordinary business number of partners shall exceed than twenty. In case of banking business they may not exceed than ten. This type of business organization is very popular in our country.
Essential Elements of a Partnership
Two or more Persons:
Minimum number of persons to start a partnership is two however there is no maximum limit on the number of partners according to the Indian Partnership Act. But the Indian Companies Act has restricted the number of partners in a Banking Business to ten and for any other business it is 20.
Voluntary Agreement
The first element shows the voluntary contractual nature of partnership. A partnership can only arise as a result of an agreement, express or implied, between two or more persons. Where there is no agreement there is no partnership. But a partnership cannot be formed with more than ten persons in banking and twenty persons in other types of business. A partnership with persons exceeding the above limits must be registered under a Companies Act.
Partnership is not created by status:
Section 5 states that, “The relation of partnership arises from contract and not from status.” In particular the members of a Hindu undivided family carrying on a family business, as such, are not partners in such business.
Example:
The sole proprietor of a business dies leaving a number of heirs. The heirs inherit the stock in trade of the business including the goodwill of the business but do not become partners until there in an agreement, express or implied, to carry on the business as partners.
Sharing of Profits of a Business
The second element states the motive underlying the information of a partnership. It also lays down that the existence of a business is essential to a partnership. Business includes any trade, occupation or profession. If two or more persons join together to form a music club it is not a partnership because there is not business in this case. But if two or more persons join together to give musical performances to the public with a view to earning profit, there is a business and a partnership is formed.
Mutual Agency
The third element is most important features of partnership. It states that persons carrying on business in partnership are agents as well as principals. The business of a firm is carried on by all or by any one or more of them on behalf of all. Every partner has the authority to act on behalf of all and can, by his actions, bind all the partner of the firm, each partner is the agent of the others in all matters connected with the business of the partnership. The law of partnership has therefore been called a branch of the law of agency.
Business:
The purpose of a Partnership firm is to carry on a business. The business must be legal. Any agreement to share the profits of an illegal business is not partnership. Also joint ownership of a property can not be termed as partnership. The business must be continuous in nature. Coming together for a single venture is not partnership.
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