The Doctrine of Holding Out states that a person is stopped from denying any such facts or any such statement that he or she makes for another person to believe. It is based upon the Principle of Estoppel which has been mentioned in the Section 115 of Indian Evidence Act, 1872. The principle states that stop will is when a person has to stand by his or her declaration which made another person to believe something to be true you and to act upon such belief, his representative know the person himself can deny such statement or facts presented. This stops fraudulent representation and misrepresentation. Firms won’t be held liable but individual would be.

The first clause of section 28 states that when a person by his oral or written conduct tense to represent himself or allows to produce centred as a partner in a firm and another person on such representation gives any credit to the firm even if the person who gave false representation of himself knows or is not aware that such representation has caused the third party to give credit to the firm. The second clause states when a partner dies and the firm continues to use the name of the deceased partner the legal representative of the deceased is not liable for any such act that has been performed by the firm.

Therefore there are two important essentials of this doctrine:

1. Representation: There has to be representation. The person has represented himself or herself to be a partner in the firm by way writing or orally making such statements. Mere carelessness should not be confused with knowingly allowing such representation.
2. Having Knowledge: It is important the third person who has passed credit to the form should prove that it such representation was done and he had knowledge about it and therefore he acted upon it. The effect of this essential is that persons maybe partners to world without being actually being partners. But apparent partners are not equal to real partners.

Exceptions:

1. Dormant Partners: Dormant or sleeping partners are those that have never taken part in the business. The partner has no knowledge about such representation therefore the doctrine of holding out does not apply.
2. Insolvent Partners: An insolvent person terminates his liability as a partner even when notice has been given or not.
3. Deceased Partner: A deceased person cannot be considered as a partner. Death is a notice in itself that person is not a partner. Therefore, a separate notice need not to be given.