PARTNERSHIP ACT,1932

HISTORY

There was no separate partnership Act before 1932. The law on partnership was contained in chapter XI (SS 239 to 266) of the Contract Act, 1872. A partnership arises from a contract and therefore such a contract is governed by the law of contract. Chapter XI was not brief enough to contain all the matters relating to partnership. Few matters of the partnership were left unnoticed. Chapter XI was passed on English precedents and common law. Therefore it could not serve the purpose due to the changes taking place in trade and business. Moreover, the contract Act was enacted fifty years ago which was quite inadequate for the present scenario. The partnership law in India before the enacting of the partnership act,1932 was the same as in England.

In India, while drafting the partnership bill, a special committee noticed few difficulties and defects in the working of English partnership Act, so there was a need to enact a separate partnership act for India .because the court functioning in English courts were quite than that of India. There was no necessity to alter the entire provision but to alter a few sections that were creating difficulties. In India, the partnership Act was enacted in 1932 and came into. force on 1st day of October 1932 except Section 69, which shall come into force on the 1st day October 1933. As it is formulated on the English partnership act,1890, it does not alter in any substantial way the provisions of English law prevailing in this country. The chief principles in both English and Indian law of partnership are almost identical.

DEFINITION OF PARTNERSHIP (section 4):

A partnership is defined as “the relationship between persons who have agreed to share profits of a business carried on by all or by any of them acting for all”.

SECTION 239 OF CONTRACT ACT 1872 ( WHICH WAS REPEALED ): defines ‘partnership ‘ thus: “partnership is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business and to share the profits thereof between them”.

ESSENTIAL INGREDIENTS OF PARTNERSHIP ACT 1932

AN ASSOCIATION OF TWO OR MORE PERSONS :

There must be at least two persons who join together to constitute a partnership. Because one person cannot become a partner with himself. As regards the maximum number of partners in a partnership firm, Section 11 of the companies Act,1956 puts the limit at 10 in case of banking business and 20 in case of any other business.

IN PURSUANCE OF AN AGREEMENT OR CONTRACT

There must be a valid agreement or contract between the partners. The agreement need not be express but may be inferred from the course of conduct of the parties. the relationship between the parties to the contract is enforceable if there is a contract between them. In case of Hindu undivided family where a business is carried on by the members of the family, the members are not called as partners and that body is not recognised as a partnership because there is no agreement between them.

RAGHUNATH SAHU & ANOTHER V. TRINATH DAS & OTHERS [ AIR 1985 ORISSA]It was held that there was an absence of agreement between the parties that either of them or any of them would carry on business on behalf of all. Court held that there is no partnership. Since the commencement, there was no agreement between parties so since starting itself that business did not exist.

TARSEM SINGH V. SUKHMINDER SINGH [1998 (3 ) SCC 471, PARA 13] It was held that it was not necessary to have a written contract but there should be an equally binding contract between parties based on an oral agreement unless there is any law saying that every contract requires agreement.