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Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,*,*,Business laws,Unit-II,Partnership Act,1932,Introduction to Topic,One of the forms in which business can be carried on is partnership,where two or more persons join together to form the partnership and run the business.In order to govern and guide partnership,the Indian Partnership Act,1932 was enacted.,Since public at large would be dealing with the partnership as customers,suppliers,creditors,lendors,employees or any other capacity,it is also very important for them to know the legal consequences of their transactions and other actions in relation with the partnership.,Features of Partnership Act,1932,Indian Partnership Act,1932 is a Central Act.(made by Parliament,This Act deals with special type of contract.(contract of partnership),Provisions regarding contract of partnership were earlier contained in the Indian Contract Act,1872.,This Act extends to the whole of India except the state of Jammu and Kashmir.,This Act came in to force on,1.10.1932,except section 69 which came into force on the,1,st,Day of October,1933.,Meaning&Definition of Partnership,Section 4,of the Partnership Act,1932 defines the term Partnership as under:,PARTNERSHIP IS THE RELATION BETWEEN TWO OR MORE PERSONS WHO HAVE AGREED TO SHARE THE PROFITS OF A BUSINESS CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL.,Thus,Partnership is the name of legal relationship between/among persons who have entered in to the contract.,Meaning of Partner Firm and Firm Name,Section 4 of Indian Partnership Act,1932 provides that:,Persons who have agreed into partnership with one another are called individually,PARTNERS,and collectively,FIRM,and the name under which their business is carried on is called the,FIRM NAME,“Partnership is thus Invisibility which binds the partners together and firm is the visible form of those partners who are thus bound together”.,Maximum Limit on Number of Partners,Section 11 Companies Act provides that the maximum no.of persons,a firm can have:,In case of partnership firm carrying on a banking business,10,In case of partnership firm carrying on any other business,20,If the number of partners exceeds the aforesaid limit,the partnership firm becomes an illegal association.,If an association of persons or firm having members or partners exceeding the Above limit will not be an illegal association if that firms objective is not to earn profit.,Two or more,persons,An agreement,Sharing of profit,Business,Mutual agency,Essential elements of Partnership,For explanation go through the next slides:,For forming a partnership the above elements should be present.Though each element is important,Mutual Agency is the conclusive proof,Nature of Partnership,A partnership firm is not a person in the eyes of Law(except for the purpose of taxation sec.2(31).It has no separate legal entity(like company)apart from the partners constituting it.,Malabar,Fisheries Co.v CIT,Further Section 5 of the Act provides that partnership arises from contract and not from status(like HUF).,Solve the Case,There are two firms namely M/s PQR and M/s ABC.These two firms are contemplating to form a new firm.Can they do so?,Answer:?,Real test of partnership Sec.6,The true test of partnership is the existence of,Mutual Agency,relationship,i.e.the capacity of a partner to bind other partners by his acts done in firms name and be bound by the acts of other partners.,Sharing of profit is an essential element of partnership but it is not a conclusive proof of partnership.,Sharing of profit is,Prima facie,evidence.,Thus partnership can be presumed when,a.There is an agreement to share the profits of business and,b.The business is carried on by all or by any of them acting for all.,Contd,.,Contd,.,The relation among partners can be ascertained as under:,a.If there is an express contract.,The real relation is ascertained from the partnership contract.,b.If there is no express contract,The real relation is ascertained from all the relevant factors such as contract of parties,books of account,statement of employees etc.,Meaning of Mutual Agency,Mutual agency refers to the relationship of,principal and agent Among partners,Example in case of,firm of A,B and C,When A acts,A-Agent,B and C-Principal,When B acts,B-Agent,A and C-Principal,When C acts,C-Agent,A and B-Principal,Partnership does not exist though there is profit sharing,.,In the following cases there is profit sharing but partnership does not exist just because of lack of,Mutual Agency,:,1.Joint owners of some property sharing profits or gross returns arising from the property.explanation I to Sec.6,Example:X and Y jointly purchased a building and contributed capital,Equally to convert the building into a hotel.They let it out on a rent Of,Rs.1,00,000 per annum and share the rental income equally.,Contd.,Leading case:,Govind,V.,Maga,Contd.,A lender of a firm(who has lent money)who receives a share
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