Partnership is a relation between two or more persons agreeing to share the profit/loss of the business run by one or more person acting for all. The persons who have entered into the partnership are individually known as ‘Partners’.

The partners, in the partnership, enter into a partnership deed which generally defines all the rights and responsibilities of partners. Subject to the partnership deed entered between the partners, the provisions of the Indian Partnership Act, 1932 also defines certain general rights and responsibilities of partners.

Right to take part in the conduct of the Business Sec.12(a)

All the partners of a partnership firm have the right to take part in the business conducted by the firm as a partnership business is a business of the partners, and their management powers are generally coextensive. If the management power of a particular partner is interfered with and the individual has been wrongfully precluded from participating, the Court of Law can intervene under such circumstances. The Court can, and will, restrain the other partner from doing so by injunction. Other remedies are a suit for dissolution, a suit for accounts without seeking dissolution and so on for a partner who has been wrongfully deprived of the right to participate in the management.

The previously mentioned provisions of the law will be applicable unless there is no existing contract to the contrary among the partners. It is common to find a term in partnership agreements that gives only a limited power of management to a specific partner or a term that the control of the partnership will remain vested with one or more partners to the exclusion of others. In such a case, the Court of Law would generally be unwilling to interpose with the management with such partner (s), unless it is proven that something was done illegally or in the breach of trust among the partners.

Right to be consulted Sec 12(c)

When a difference of any sorts arises between the partners of a firm concerning the business of the firm, it shall be decided by the views of the majority among the partners. Every partner in the firm shall have the right to express his opinion before the decision is made. However, there can be no changes like the business of the firm without the consent of all the partners involved. As a routine matter, the opinion of the majority of the partners will prevail. Although, the majority rule would not apply when there is a change like the firm itself. In such situations, the unanimous consent of the partners is required.

Right of access to books Sec.12(d)

Every partner of the firm, regardless of being an active or a sleeping partner, is entitled to have access to any of the books of the partnership firm. The partner has the right to inspect and take a copy of the same if required. However, this right must be exercised bonafide.

Right to remuneration Sec 13 (a)

No partner of the firm is entitled to receive any remuneration along with his share in the profits of the business by the firm as a result of taking part in the business of the firm. Although, this rule may always vary by an express agreement, or by a course of dealings, in which case the partner will be entitled to remuneration. Thus, a partner may claim remuneration even in the absence of a contract, when such remuneration is payable under the continued usage of the firm. In simpler words, where it is customary to pay remuneration to a partner for conducting the business of the partnership firm, the partner may claim it even in the absence of a contract for the payment of the same.

It is common for partners to agree that a managing partner will receive over and above his share, salary or commission for the trouble that he will take while conducting the business of the firm.

Right to share profits Sec 13(b)

Partners are entitled to share all the profits earned in the business equally. Similarly, the losses sustained by the partnership firm is also equally contributed. The amount of a partner’s share must be ascertained by inquiring whether there is an agreement in that behalf among the partners. If there is no agreement, then it can be presumed that the share of profit is equal and the burden of proving that the shares are unequal, will lie on the party alleging the same.

The is no relation between the proportion in which the partners shall share the profits and the percentage in which they have contributed to the capital of the partnership firm.

Interest on capital Sec 13 (c)

If a partner subscribes interest on capital is payable to the partner under the partnership deed, then the interest will be payable out of the profits only in such a case. In a general rule, the interest on a capital subscribes by partners is not permitted unless there is an agreement or a usage to that effect. The underlying principle in this provision of law is that with concern to the capital brought by a partner in the business, the partner is not a creditor of the firm but an adventurer.

The following elements must be ensured before a partner can be entitled to interest on the capital brought by the partner in the business.

1. An express agreement to the same effect or the practice of a particular partnership.
2. Any trade custom to that effect; or
3. A statutory provision which entitles him to such interest on the capital.

Interest on advances Sec13(d)

If a partner makes an advance to the partnership firm in addition to the amount of capital to be contributed by him, the partner is entitled to claim interest thereon at 6 per cent per annum. While the interest on capital account ceases to run on dissolution, the interest on advances keeps running even after dissolution and up to the date of payment. It can be noted that the Partnership Act makes a distinction between the capital contribution of a partner and the advance made by him to the firm. The advance by the partner is regarded as loans which should bear interest while the capital interest takes interest only when there is an agreement to this effect.

Right to be indemnified Sec 13(e)

All the partners of the firm have the right to be repaid by the firm in respect of the payments made and the liabilities incurred by him in the ordinary and proper conduct of the business of the firm. This also includes the performance of an act in an emergency for protecting the firm from a loss, if the payments, liability and action are such as a prudent man would make, incur or perform in his case, under similar circumstances.

Right to stop the admission of a new partner Sec31

All the partners of a partnership firm have the right to prevent the introduction of a new partner in the firm without the consent of all the existing partners.

Right to retire Sec32(1)

Every partner of a partnership firm has the right to withdraw from the business with the consent of all the other partners. In the case of a partnership formed at will, this may be done by giving a notice to that effect to all the other partners.

Right not to be expelled Sec33

Every partner of a partnership firm has the right to continue in the business. A partner cannot be dismissed from the firm by any majority of the partners unless conferred by a partnership agreement and exercised in good faith and for the advantage of the partnership firm.

Right of outgoing partner to carry on a competing business Sec 36(1)

A partner outgoing from the partnership firm may carry on a business competing with that of the firm. The partner may even advertise such activity but has to do so without using the firm’s name or representing himself as carrying on the business of the firm or soliciting the clients who were dealing with the firm before the partner ceased to be a part of the partnership firm.

Right of outgoing partner to share subsequent profits Sec 37

If a partner has passed away or ceased to be a partner and the existing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the outgoing partner or his estate, the outgoing partner or his estate has, at his or his representative’s option, the right to such share of profit made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm or interest at 6 per cent per annum on the amount of the partner’s share in the property of the firm.

Section 40: Right to dissolve the firm

A partner of a partnership firm has the right to dissolve the partnership with the consent of all the other partners. However, where the partnership is at will, the firm may be dissolved by any partner by giving notice in writing to all the other partners of his intention to dissolve the firm.

Duties of a Partner

General duties of a partner sec 9

Partners are legally bound to carry on the business of the partnership firm. The general responsibilities of a partner are listed below.

1. A partner is required to carry on the business to the highest common advantage.
2. A partner is required to be just and faithful to each other
3. A partner has to render to any other partner or his legal representative about the true account and all the information of all the things affecting the partnership firm.

To indemnify for fraud Sec 10

According to Section 10, a partner of the partnership firm is liable to compensate the firm for any damages caused to its business or the firm because of a partner’s fraud in the conduct of the business of the firm.

To indemnify for willful neglect Sec13 (f)

According to the Section, a partner of a partnership firm must compensate the firm for any damages or loss caused to it by willful neglect in the conduct of the business of the firm.

To attend duties diligently without remuneration Sec 12(b) & 13(a)

According to Section 12(b) of the Indian Partnership Act, every partner is legally bound to attend to his duties diligently to his duties relating to the conduct of the firm’s business. Moreover, Section 13(a) enumerates that a partner is not, however, generally entitled to remuneration for participating in the conduct of the business. A partner is also bound to let his partners have the advantage of his knowledge and skill.

To share losses Sec13 (b)

All the partners of a partnership firm are liable to contribute equally to the injury sustained by the firm.

To account for any profit Sec16(a)

If a partner of a partnership firm derives any profit for himself for any transaction of the firm or from the use of the property or business connection of the firm or firm’s name, then the partner is bound to account for that profit and refund it to the firm.