Indian Partnership Act 1932 [Business Law Notes for BCOM NEP Syllabus]

Indian Partnership Act 1932
[Business Law Notes for BCOM NEP Syllabus]
FOR B.COM/CA/CS/CMA EXAM

In this page, you will get Indian Partnership Act 1932 Notes which are useful for B. Com and Various Professional Exams Like CA/CMA and CS.

These Notes are Useful for:

- Dibrugarh University

- Gauhati University

- Assam University

- IGNOU

We update this page frequently to add new questions. Chapter wise Business Law Notes are also included in this post.

📑 Table of Contents – Indian Partnership Act, 1932

Meaning and Characteristics of Partnership
Partnership Deed – Meaning, Importance & Contents
True Test of Partnership
Registration of Firms & Consequences of Non-registration
Different Types of Partners and Partnership
Minor Partner – Rights, Liabilities & Position
Rights and Duties of Partners
Differences
Partnership Property
Implied Authority of Partners

Meaning and Characteristics of Partnership

Partnership is an association of two or more people who agreed to do business and share profits and losses arises from it in an agreed ratio. The partners act both as agents and principals of the firm.

In India, Partnership firm is governed by the Indian Partnership Act 1932. Section 4 of this act defines partnership as: "The relationship between persons, who have agreed to share the profits of a business carried on by all or any one of them acting for all."

According to Prof. Haney, partnership is "the relation between persons competent to make contract who agree to carry on a lawful business in common with a view to private gain."

Partnership in this way is an agreement, between two or more persons to carry on legal business with profit motive, which is carried on by all or any one of them acting for all.

Partners, Firm and Firm name: The persons who have entered into a partnership with one another are individually called partners and collectively a firm. The name under which the business is carried is called firm name.

Partnership has the following characteristics:

(i) Agreement: Partnership is the result of an agreement, either written or oral, between two or more persons. An agreement between the partners may be expressed or implied. It arises from contract and not from status or process of law.

(ii) Number of Persons: In a partnership firm there must be at least two people to form the business. Partnership Act 1932, does not specifies the maximum numbers of persons, but Section 464 of the Indian Companies Act 2013, restricts the number of Partners to 50 for a partnership firm. But in case of limited liability partnership there is no maximum limit.

(iii) Profit-Sharing: The agreement between/among partners must be to share profit or losses. Sharing of profit is an essential feature of partnership. But an agreement to share losses is not an essential element. There may be specific provision in the partnership deed that a particular partner or partners shall not bear the losses.

(iv) Business: The existence of business is essential in case of partnership. The term business includes every trade, occupation and profession. Also the motive of the business is the acquisition of gain which leads to the formation of partnership. If there is no intention to carry on the business and to share the profit thereof, there can be no partnership.

(v) Business carried on by all or any of them acting for all: Business must be carried on by all the partners or any one of them acting as agent of other partners. Each partner carrying on the business is the principle as well as the agent for all the other partners. Any act of one partner in the course of the business of the firm is in fact an act of all the partners. This relationship between the partners is the true test of partnership.

(vi) Motive: For a partnership firm there must be motive to earn profit. A partnership firm cannot be formed with service motive.

(vi) Legality of the Business: The business to be carried on by the partners must be legal. There should be lawful consideration and the business should not be illegal in the eyes of law.

Partnership Deed – Meaning, Importance & Contents

A partnership is formed by an agreement. This agreement may be oral or in writing. Though the law does not expressly require that the partnership agreement should be in writing, it is desirable to have it in writing. A written agreement, which contains the terms of partnership, as agreed to by the partners is called ‘Partnership Deed.’

Importance: It is a very important document of the firm which defines relationship amongst the partners. It is necessary to avoid disputes amongst the partners and can be presented in the court as evidence.

Contents (Clauses) of the Deed:

a) Name and address of the firm.

b) Names and addresses of the partners.

c) Nature of Business.

d) Amount of capital to be contributed by each partner.

e) Profit or loss sharing ratio.

f) Date of commencement of partnership.

g) Interest of Capital, if provided the rate of interest must be specified.

h) Partner’s salaries and commission, if provided.

i) Interest on Drawings, if charged, the rate of interest should also be specified.

True Test of Partnership

According to Sec.4 of the Indian Partnership act, 1932 “Partnership is the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.” Generally, a partnership consists of three essential elements:

(a) There must be agreement between partners.

(b) The agreement must be to share the profits of the business.

In order to determine the existence of partnership between groups of persons, agreement between persons must be taken into consideration. If the agreement is to share the profits of a business, and the business is carried on by all or any of them acting for all, there is partnership otherwise not.

But if there is no agreement or the agreement is such as it does not specifically speak of partnership, the real relation between the parties should be taken as base in determining the existence of partnership (sec.6).

The real relation between the parties is to be determined from all the relevant facts, i.e., the written or verbal agreement, surrounding circumstances at the time when the contract was entered into, conduct of the parties and other relevant facts, e.g., books of accounts, correspondence, evidence of employees, etc. These facts are to be considered collectively not individually. In effect it is the substance of the facts, not the form that has to be looked into in determining the real relation between the parties. There may be cases where the parties expressly state in a document that they are not partners but they may turn out to be partners in the eyes of law, when all the facts are taken into account. Again, a statement by the parties in a document that they are partners may not necessarily constitute them partners in law.

The sharing of profit is an essential element to constitute a partnership. But, it is only a prima facie evidence and not conclusive evidence. The receipt of a share of the profits of a business by a person or a payment contingent upon the earnings of profits or varying with the profits earned by business would not by itself make him a partner with the persons carrying on the business. Sec. 6 enumerates cases where there is sharing of profits but the partnership relation does not exist. These cases are:

(a) Joint owners of property sharing profits or gross returns arising from the property do not become partners.

(b) Where a lender lent money to persons engaged or about to engaged in business, and receives a rate of interest varying with the profit.

(d) Where the widow or child of a deceased partner receives a portion of the profits.

(e) Where a person has sold his business along with its goodwill and receives a portion of the profits in consideration of the sale.

Although the sharing of profits of a business is a strong test of partnership, yet the existence of relation of partnership must depend upon the real intention and conduct of the parties.

Registration of Firms & Consequences of Non-registration

The registration of a partnership is not compulsory but to avoid future problems it is necessary for a firm to get itself registered under the Indian Partnership Act, 1932. Sec. 58 of the Indian Partnership Act lays down the provisions relating to the registration of a firm. If partners want to get their firm registered, they have to file statement in the prescribed form. The statement can be send by post or delivered to the registrar of the area in which the place of business is situated. The following points must be stated in the statement of registration:

a) The firm’s name

b) The principal place of business of the firm

c) The names of any other places of business

d) The date when each partner joined the firm

e) The name and address of the firm

f) The duration of the firm

The statement of registration shall be signed by the partners or their authorised agents. When the registrar is satisfied that the provisions of Sec. 58 have been duly complied with, he shall record an entry of this statement in the register of firms and shall file the statement.

Consequences of Non-registration of firms

The Indian Partnership Act does not make registration of a firm compulsory nor does it impose any penalty for non-registration. It is optional for the firm to get itself registered or not. However, Section 69 puts down certain disabilities to a non-registered firm which normally forces the partners the partners to get the firm registered. The effects of non-registration are as follows:

(a) No suit by a partner against other partners or firm: A partner of an unregistered firm cannot sue the firm or any partner of the firm to enforce a right arising from the contract or conferred by the Partnership Act. He can do so only if the firm is registered and the person suing is shown as a partner in the register of firms.

(b) No suit against any third party: An unregistered firm cannot sue a third party to enforce a right arising from a contract. The firm can only do so if the firm is registered and the person suing is shown as a partner in the register of firms.

(c) No right to counter claim or to claim setoff: An unregistered firm or any partner thereof cannot claim setoff in the proceedings instituted against a firm by a third party to enforce a right arising from a contract. Setoff means a claim by the firm which would reduce the amount of money payable to the claimant.

(d) Arbitration proceedings: In Jagdish Chandra Gupta vs. Kajaria Traders (India) Limited it was held that arbitration proceedings were barred if the firm was unregistered.

Non registration of the firm however, does not affect the following rights:

(i) The right of a third party to sue the unregistered firm or its partners.

(ii) The right of a partner to sue for dissolution of a firm or for accounts of a dissolved firm or any right to realise the property of the dissolved firm.

(iii) The Power of an official assignee or court receiver to realise the property of an insolvent partner.

(iv) The right of a firm or partners of a firm having no place of business in India.

(v) The right of an unregistered firm to enforce a right arising otherwise then out of a contract.

(vi) One partner can bring a suit for damages for misconduct against the other partner.

(vii) The right to claim Set off in a suit for an amount not exceeding Rs.100/- in value.

Different Types of Partners and Partnership

Different types of Partnership: The following are the different types of Partnership:

1) General Partnership: In a general partnership, the liability of each partner is unlimited. It means that the firm’s creditors can realize their dues in full from any of the partners by attaching their personal property if the firm’s assets are found to be inadequate to pay off its debts. An exception is made in the case of a minor partner whose liability is limited to the amount of his share in the capital and profits of the firm. In India all partnership firms are general partnerships. Each partner of a general partnership is entitled to take active part in the management of the firm, unless otherwise decided by the other partners.

2) Limited partnership: A limited partnership is a partnership consisting of some partners whose liability is limited to the amount of capital contributed by each. The personal property of a limited partner is not liable for the firm’s debts. He cannot take part in the management of the firm. His retirement, insolvency, lunacy or death does not cause dissolution of the firm. There is at least one partner having unlimited liability. A limited partnership must be registered. Limited partnership is now allowed in India under the Limited Liability Partnership Act. In England limited partnership can be formed under the Limited Partnership Act, 1907 and in the USA under the Partnership Act, 1890.

3) Particular Partnership: Where two or more persons agree to do a business in a particular adventure or undertaking such a partnership is called a ‘particular partnership’. For example: A and B enter into a partnership for producing of film.

4) Partnership-at-will: When no provision is made by the contract between the partners for the duration of the partnership or for the determination of the partnership, the partnership is called partnership-at-will. The partnership-at-will has no fixed or definite date of termination and therefore death or retirement of any of the partner does not affect the existence of the partnership. A partnership-at-will can be dissolved by any partner by giving notice in writing to all the remaining partners about the intention of such dissolution.

Different Types of Partners: The different types of Partners are:

(i) Active Partner: A person who is actively, actually or effectively engaged in the conduct of business of the partnership firm is known as an Active Partner. He is the agent of the other partners and has authority to bind the firm and the other partners in the ordinary course of business.

(ii) Sleeping or Dormant Partner: A sleeping partner is one who does not take an active part in the conduct of business of the firm. He invests capital and shares the profits of the firm and is also equally liable along with other partners for all the liabilities of the firm.

(iii) Nominal Partner: A person who lends his name to the firm, without having any real interest in it is called a Nominal Partner. He does not invest any capital in the business nor does he takes any active part in the business nor does he share any profit of the firm. However, he is liable along with other partners for all the liabilities of the firm.

(iv) Partner in Profit only: Where a partner agrees with the other partners that he shall share only profits and shall not be liable for any losses of the firm he is called Partner in Profit only. However, he remains liable to the creditors for the debts of the firm since under the Partnership Act the liabilities of the partners are joint, several and unlimited.

(v) Sub-Partner: Where a partner agrees to share his profits earned form the firm with a third person then that third person is known as the sub-partner. A sub-partner has no rights against the firm and cannot represent himself as a partner of the firm. He is in no way connected with the firm and is thus not liable for the liabilities of the firm.

(vi) Partner by Estoppel or by Holding Out: Sometimes strangers represent themselves to be partners in a firm and thereby induce third parties to give credits to the firm such strangers are called as partners by Estoppel or Partners by Holding Out. Section 28 of the Partnership Act prescribes that a person be liable as a partner by Holding out must fulfill the following condition:

(a) He must have by words, written or spoken or by his conduct, represented himself to be a partner or

(b) He must have knowingly permitted himself to be represented as a partner to the other person and

(vii) Minor Partner: As per Section 11 of the Indian Contract Act, 1872 a minor cannot enter into an agreement. However, Section 30 of the Partnership Act provides that with the consent of all the partners for the time being a minor may be admitted to the benefits of Partnership.

Minor Partner – Rights, Liabilities & Position

Minor Partner: As per Section 11 of the Indian Contract Act, 1872 a minor cannot enter into an agreement. However, Section 30 of the Partnership Act provides that with the consent of all the partners, a minor can be admitted for the benefits of partnership. This provision is based on the rule that a minor cannot be a promisor but he can be a Promisee or a beneficiary.

Rights of a Minor before attending the age of Majority:

(i) He has a right to share the profits and the property of the firm as may be agreed.

(ii) He has a right to have access to and inspect the books of accounts of the firm.

(iii) Right to sue for payments of his share of profit or property in case of his severance of connection with the firm.

(iv) He has a right to elect to become a partner on attaining the age of Majority.

(v) He has a right to elect not to become a partner on attaining the age of Majority.

Liabilities of a Minor before attending the age of Majority:

(i) A minor’s share is liable for the acts of the firm.

(ii) He is not personally liable for sharing any liabilities or losses of the firm in his personal capacity nor is his personal property liable.

(iii) A minor cannot be declared insolvent, but if the firm is declared insolvent his share in the firm vests in the official receiver/assignee.

Position of the Minor on attending the age of Majority:

On attending Majority, the minor partner has to decide within six months whether he want to continue as partner in the firm or discontinue as a partner from the firm. The period of six months starts from the date of his majority or from the date when he first comes to know that he has been admitted to the benefits of the partnership, whichever is later. Within the said period of six months he should give a public notice of his choice whether to continue as a partner or not to continue as a partner. If he fails to give a public notice he is deemed to have become a partner in the firm on the expiry of the said six months.

Position of a minor if he elects to become the Partner after attending the age of Majority:

(i) He becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of the partnership.

(ii) His share to the profits of the firm is the same as he was entitled to as a minor partner.

Position of a minor if he elects not to become the Partner after attending the age of Majority:

(i) His rights and liabilities of the partner as a minor continue up to the date of the notice.

(ii) His share is not liable for any acts of the firm done after the date of the public notice.

(iii) He is entitled to sue the partners for his share of the profits and property of the firm.

Rights and Duties of Partners

The Rights of a partner are as under:

(i) To take active part in the business: Every partner has a right to take active part in the conduct and management of the business of the firm.

(ii) To share Profits: Every partner has a right to share profits earned and are liable to contribute to the losses incurred by the firm.

(iii) To be consulted: Every partner has a right to be consulted in all matters affecting the business of the partnership firm before any decision is been taken. In case of difference of opinion, it may be settled by decision of majority of the partners.

(iv) To have access to the accounts: Every partner has a right to have access, inspect and copy the books of accounts of the firm.

(v) To be indemnified: Every partner has a right to be indemnified for the expenses incurred or payments made in the ordinary course of business.

(vi) To use the property of the firm: Every partner has a right to use the property of the firm for the purposes of the business of the firm. If the partner uses the firm’s property for private purpose, then he is liable to compensate the firm for the same.

(vii) Interest on capital: Every partner has a right to receive interest on capital at a certain rate as may be specified and agreed in the partnership agreement. Such interest is payable only out of profits, in any, earned by the firm.

(viii) Interest on loan: Every partner has a right to receive interest on loan at the rate of 6% p.a. on any loans or advance payments made by him beyond the capital. Such interest is payable not only out of the profits but also from the assets of the firm.

(ix) To act as agent of the firm: Every partner has a right to act as the agent of the firm and to bind the firm and other partners for acts done by him in ordinary course of business.

(x) To retire: A partner has a right to retire (a) with the consent of all the other partners, or (b) in accordance with the express agreement between the partners or (c) in case of Partnership-at-will by giving notice to all the other partners of his intention to retire.

The duties of a partner are as under:

(i) To carry on the business to the common advantage: Every partner is bound to:

(a) Carry on the business of the firm to the greatest common advantage.

(b) To be just and faithful to each other in the mutual dealings.

(d) Render true accounts and full information of all things, affecting the firm, to any partner or his legal representative.

(ii) To indemnify: Every partner is bound to indemnify the firm:

(a) For any loss cause to it by his fraud in the conduct of business of the firm.

(b) For any loss incurred due to his willful neglect in the conduct of the business of the firm.

(iii) To attend diligently to his duties: Every partner is bound to attend diligently to his duties in the conduct of the business of the firm. He must use his knowledge and skill for the benefit of the firm.

(iv) To account for private profits: If a partner derives any benefit, without the consent of the other partners from any transactions of the firm or from any use of the partnership property, name or business connection. He must account for it and compensate it to the firm. There exists a fiduciary relationship between partners and therefore no partner is entitled to make any personal profit.

(v) To account for profit in competing business: A partner must not carry a business as of competing nature with the firm. If he does that then he is bound to account for and compensate to the firm all the profits made by him in that competing business.

(vi) To act within authority: Every partner is bound to act within the scope of his actual or implied authority.

(vii) To hold and use the property of the firm exclusively for firm’s business: Every partner is bound to hold and use the property of the firm exclusively for the purposes of the business of the firm.

(viii) Not to assign his rights: A partner cannot assign rights and interest in the firm to an outsider so as to make him the partner of the firm. He can, however, assign his share of the profit and share in the assets of the firm.

(ix) To be liable jointly and severally: Every partner is liable jointly with all the other partners and also severally for all the acts of the firms done during the period he is the partner.

Difference between Partnership and Hindu Undivided Family

Difference between Partnership and Hindu Undivided Family

Basis	Partnership	Hindu undivided Family
1. Definition	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.	A Joint Hindu Family which carries on business handed down from its ancestors.
2. Agreement	It can arise only by an agreement of the Partners.	It arises by operation of law. It cannot be created by an agreement of the members.
3. Admission of interest	A new partner can be admitted in the Partnership, only with the consent of all the Partners.	A person becomes the member only by birth in the family.
4. Acquisition of interest	A partner acquires interest in the business only by an agreement.	A person acquires interest in the business by birth in the family.
5. Number	There is a statutory limit on maximum number of Partners. Section 464 of the Indian Companies Act 2013, restricts the number of Partners to 50 for a partnership firm.	There is no statutory limit on maximum number of members.
6. Minor members	A minor cannot become a full-fledged partner. He can only be admitted to the benefits of partnership with the consent of all the partners.	A male minor is the full-fledged member. He becomes member merely by birth in the family.
7. Mutual agency	There is a relationship of agency between the partner i.e. all the partners are mutual agents.	There is no such agency relationship between all the members of the family. The Karta (i.e. manager) of the family is the only representative of the family.
8. Liability	A Partner is personally liable for the business obligations of the firm. The share of each partner in the partnership property and profits along with his private property is liable for the discharge of debts of the partnership.	A member is not personally liable for the business obligations of the family. Only his share of property and profits in the family is liable for the discharge of the debts of the family. However, the Karta is personally liable for the business obligations of the family.
9.Effect of death/ insolvency	It is dissolved on the death or insolvency of any one partner.	It is not dissolved on the death or insolvency of any member.
10.Right to demand accounts	A Partner has right to demand inspect and copy any accounts of the firm. Moreover, he also has the right to demand the dissolution of the firm.	A member has no right to ask for accounts of the past dealings of the family. There is no concept of dissolution of the family.
11.Dissolution	A partner has right to demand for dissolution.	A member has right to demand the partition of the joint family property.
12.Registration	Registration is not optional but the unregistered firm suffers certain disabilities.	There is no concept of registration of Hindu

Difference between Partnership and Company

Difference Between Partnership and Company

Basis	Partnership	Company
1.Definition	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.	A Company means a company formed and registered under this Act or an existing Company.
2.A Legal Person	A firm is not a legal Entity.	A Company on the other hand, is a Legal Person.
3. Liability	In a Partnership, the liability of partners is unlimited.	In case of a company, which is limited, the liability of the members is limited to the extent of its share capital.
4.Transfer of Shares	In a firm, a partner cannot transfer or assign the whole of his share without the consent of all the partners of the firm	In a company, a shareholder can transfer his share subject to the provisions of the Articles of the Company.
5.Mutual Agents	In a firm, all partners are mutual agents.	In a company, a member is not an agent of
6.Registration	Registration of a firm is not compulsory under the Partnership Act, 1932.	Registration of a company is compulsory under the Companies Act, 2013.
7.Management	Management vests in the hands of the Partners except in the case of Sleeping Partners.	Management vests in the board of Directors, elected periodically by the shareholders.
8.Creditors	Creditors of firm are also creditors of the partners individually as well.	Creditors are only the creditors of the company and not of the individual shareholders.
9.Statutory obligations	A partnership has less statutory obligations	A company is strictly regulated under the Companies Act, 2013.
10.Accounts	Accounts of a partnership firm need not be audited by the auditor.	Accounts of a company must be audited by an auditor.
11. To whom property belongs.	The property of affirm belongs collectively to the partners.	The property of a company, on the other hand, belongs to the company, and not to the shareholders.
12.Effect of death of partners and members	In the case of a firm, death or insolvency of a partner resolution the dissolution of the firm, unless there is a contract to the contrary.	In the case of a company, death or insolvency of a member of the company does not result in the dissolution of the company.
13.Contract with the firm or company	A Partner cannot enter into a contract with the firm, in which he is a partner, because the firm is not a legal person.	A shareholder, on the other hand, can enter into a contract with the company, of which he is a member, because the company is a legal person.
14.Power to dispose of property	A partner can dispose of the property of the firm.	A Shareholder cannot dispose of the property of the company.
15.Limit on number of members	There is a statutory limit on maximum number of Partners. Section 464 of the Indian Companies Act 2013, restricts the number of Partners to 50 for a partnership firm.	In the case of a company, a Private Company: Minimum 2 and Maximum 200 and in case of Public Company: Minimum 7 and Maximum unlimited.

Difference between Partnership and Co-ownership

Difference between Partnership and Co-ownership

Basis	Partnership	Co-ownership
1. Basis of creation	Partnership is arises from contract not from status.	Co-ownership may be arises from contract or from status.
2. Covered by	Partnership is covered under the Indian Partnership Act’ 1932.	Co-ownership is not covered under the Indian Partnership Act’ 1932.
3. Transfer of interest	No partner can transfer his interest to anyone without the consent of all partners.	A co-owner can transfer his share.
4. Sharing of profit	Sharing of profit is the basis of partnership.	Sharing of profit may or may not exist in a co-ownership.
5. Agent	Each partner acts as an agent of the firm.	Co-owners are not the agent of the firm.

Partnership Property

Property of the firm is taken to mean the joint property of all the partners. The Partners in fact by an agreement amongst themselves may determine, what constitutes the property of the firm. In the absence of such agreement, the following shall constitute the property of the firm.

(i) Property originally brought in by the firm: Any property which is brought by the partners, at the commencement of the partnership and put into joint stock of the firm

(ii) Property acquired afterwards: Any property which is acquired by or for the firm, after the commencement of the partnership is the property of the firm.

(iii) Partner’s personal property in the firm’s use: Where the personal property of a partner is used in the business of the firm, it depends upon the intention of the parties whether it has become the property of the firm or not.

(iv) Conversion of joint properties into separate property: Where a property is bought with the money of the firm, but in the name and for the exclusive benefit of a partner, the partner becomes a debtor to the firm for the purchase money; and the property becomes the personal property of the partner. Similarly, where a part of the joint properties is allotted to a partner, on the dissolution of a firm, it becomes his separate, personal property.

(v) Goodwill: The term goodwill has been not been defined in the act. It means every advantage and good representation and reputation which the firm has acquired while carrying out its business. Goodwill is the property of the firm and it can be sold either separately or along with the other property of the firm. Hence goodwill is the part of the property of the firm

Implied Authority of Partners

The partners are agent of the firm and they are the hands through which the firm has to function. The partners are authorised to work for the firm and this authority may be expressed or implied. Authority means capacity of partners to bind the firm by his act. Where the authority has been given in express terms, the authority is called expressed authority. Expressed authority may be written or oral. But when it is not possible to mention the express authority of partners, the law presumes that the partner can do everything for the business in usual way and his acts bind the firm. The authority of a partner to bind the firm, conferred by this section, is called his implied authority. Generally, if there is no expressed authority in the contract of partnership, a partner has the implied authority to do the following acts on behalf of the firm:

a) To buy, sell and pledge goods on behalf of the firm.

b) To raise loans on the security of such assets.

c) To receive payments of debts due to the firm.

d) To accept, make an issue bills of exchange, promissory notes, etc., on behalf of the firm.

e) To engage servants for the firm’s business.

f) To take on lease a premises on behalf of the firm.

But, In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to:

a) Submit a dispute relating to the business of the firm to arbitration;

b) Open a banking account on behalf of the firm in his own name;

c) Compromise or relinquish any claim or portion of a claim by the firm;

d) Withdraw a suit or proceeding filed on behalf of the firm;

e) Admit any liability in a suit or proceeding against the firm;

f) Acquire immovable property on behalf of the firm;

g) Transfer immovable property belonging to the firm; or

h) Enter into partnership on behalf of the firm.

Extension and restriction of implied authority: Section 20 provides that the partners may extend or restrict the implied authority of any partner by contract between the partners. Despite such restrictions, any act done by a partner on behalf of the firm, which falls within his implied authority, binds the firm unless the person, with whom he is dealing, knows of the restriction or does not know or believe that partner to be a partner.

Authority in emergency: Section 21 provides that in case of emergency a partner has authority to do all such acts for the purpose of protecting the firm from loss as would be done by a person of ordinary prudence, in his own case acting under similar circumstances, and such acts bind the firm.

Indian Partnership Act 1932 [Business Law Notes for BCOM NEP Syllabus]