Common Disputes -FAQ in Partnership Firm

Q. I have taken on rent particular premises. Later I entered into a partnership. The firm so formed is carrying on its business on the premises taken on rent by me. Does it amount to subletting?

A. It does not amount to sub letting. When a person after taking premises on rent, enters into partnership firm to carry business, it did not amount to sub letting because the premises continues to remain in possession of the tenant.

Q. I want to form a partnership firm. Is it necessary that there should be express provisions for duration or determination of a partnership firm?

A. The essential requirement of partnership at will are, (1) as to duration of partnership, there is no mention in the partnership, (2) there is no provision for its determination, However, it is not necessary that there should always be express provision of duration or determination of partnership. The real test would be intention of the parties.

Q. I am the owner of a property. I have permitted the firm of which I am a partner, to use the said property while carrying out its business. Has that property become the firm’s property by virtue of my permission to use the said property?

A. The property belonging to a partner, does not become property of the firm merely on his permitting to be used in the partnership business.

Q. Some of the members of my family have formed a partnership firm. Though I am not a member of that firm, I have made certain deposits in that firm. The firm has purchased some property out of deposits made by members and also by non-members. Does the deposits made by a non member become the property of the firm? Does the property purchased by the firm out of deposits made by partners as well as by non-partners constitute property of the firm?

A. Deposits made with the firm by the partners as well as non-partners and the property purchased out of those deposits, would not be property of partnership firm. The deposits made by non-partner family members could not be deemed to be the property of the firm. The expression “purchased or otherwise” in Section 14 means that the property is to be purchased or it is to be obtained by gift or surrender or by other means, resembling with the expression “purchased”.

Q. I as a partner of a firm have brought some of my personal assets to the firm as my contribution. Have I lost my exclusive rights to the said assets?

A. In a case of a partner bringing his personal assets in the partnership firm as a contribution to capital, his exclusive rights to the said assets will be reduced to share alongwith other partners as the property will become proprietary of the firm.

Q. A partner of my firm signed a pronote for an amount, which was in excess of his implied authority. Under what circumstances will that pronote be binding on the partners of the firm?

A. I a case where the pronote was signed by one of the partners for an amount lower than what was due to the firm which was in excess of his implied authority, if the other partners subsequently agree to the same, the said pronote will be binding on the partners.

Q. I want to admit my grandson who is 15 years old to the profits of the partnership firm, which is managed by me. Can minors have share in the property of the firm?

A. Though minor may not be partner of the firm but with the consent of all the partners he may be admitted to profits of the partnership and such partner will have a share of property and profits as may be agreed upon.

Q. I had formed a partnership firm with my friend who expired last month. Can I now enter into partnership with the heirs of my deceased partner?

A. Where there were two partners, after the death of one, the firm will automatically come to an end. However, surviving partner may enter into partnership with the heirs of the deceased in which case that will be a new partnership firm.

Q. The partnership firm of which I was one of the partners has been dissolved. What are the rights of the partners after dissolution of the firm?

A. Every partner will be entitled to have the property of the firm applied in payment of liabilities of the firm and thereafter to distribute the surplus, among the partners. Section 46 and 48 are two main sections, which are applicable after dissolution of the firm regarding distribution of the assets of the firm and for settlement of accounts.

Q. I had entered into partnership by paying a premium. Under the terms of the partnership deed, the said partnership was required to continue for a fixed term but the said partnership was dissolved earlier than that term. Am I entitled to repayment of the premium or any part thereof on account of the premature dissolution of the firm?

A. Where a partner has paid a premium on entering into partnership of a fixed term, and the firm is dissolved before the expiry of the term, otherwise then by the death of the partner, he shall be entitled to re-payment of the premium or of such part thereof, as may be reasonable except where dissolution was due to his own misconduct, or in pursuance of agreement containing no provisions for return of premium, or any part of it.

Q. After dissolution of the firm, of which I was one of the partners, another partner of the said firm has commenced a similar business in the name of the erstwhile firm. Can I restrain that partner from carrying on the said business?

A. After dissolution of the firm, every partner in entitled to restrain any other partner or his representative from carrying on a similar business in the firm name or from using any of the property of the firm for his own benefits until the affairs are complete. It was held in a case that on dissolution of partnership, quota could not be divided as it was not an asset of partnership but a matter of privilege and the grant of its will lie with the concerned authority. Therefore, the quota, which is a license, cannot be divided on dissolution.

Q. I want to get my partnership firm register. Please advise me.

A. Registration of a firm can be affected by filing application to the Registrar of the area within which business is situated alongwith required fee and particulars regarding name of the firm, place or principal place of the firm, name of any other place of carrying on business alongwith name and address of all the partners and duration of the firm.

Q. When I got married, my husband presented me with certain articles, which constituted my stridhan. Do these articles form part of partnership property with my husband?

A. Entrustment of certain articles constituting stridhan which was presented to the wife at the time of marriage, by the husband do not constitute partnership property with the husband only because wife and husband were living together. Since essential elements of partnership do not exist, mere factum of entrustment of stridhan would not constitute any co-ownership or legal partnership as defined under Section 4 of the Partnership Act.