The Indian Partnership Act, 1932 contains provisions that govern the relation of partners to one another. The partners of a partnership firm can draft their terms and conditions with respect to their duties, roles and responsibilities in a partnership deed. In the absence of a partnership deed, the provisions given under the Indian Partnership Act are applicable. Let’s understand the duties and responsibilities of the partners in a partnership firm.
Relation of Partners with One Another
Although the partners are free to form a partnership agreement that defines their rights and duties, there are certain rights and duties given under the Indian Partnership Act, 1932, that cannot be altered by the partners entering into an agreement to the contrary (Section 11). Since all the partners are agents in a partnership firm, they must act in good faith with each other. Any contract that is binding on one partner is binding on the other partners as well (Section 9, Indian Partnership Act, 1932).
Rights of Partners Inter-se (with one another)
The partners in a partnership firm can exercise the following rights unless the partnership deed states otherwise:
Right to Participate in Conducting the Business
Section 12(a) of the act states that the partners of a firm have a right to participate in the activities/business of the firm. Through a provision in the agreement, this right can however be curtailed, allowing only some partners to participate actively in the business.
Right to have access to the Books and Accounts of the Firm
The partners, both dormant and active partners, have an equal right to inspect and copy the books of accounts of the firm.
Right to Express Their Opinions
All the partners of the firm are entitled to express their opinions. Any decision pertaining to the business can be taken based on a majority view.
Right to Profit Sharing
The partnership deed states the profit sharing ratio of the partners. In the absence of the same in the deed, the partners have a right to share the profits of the firm equally.
Right to Indemnification
The partners of a partnership firm have a right to be indemnified against any payments made or any liabilities incurred by any of them in the course of business. Such a decision or act must be considered reasonable under the normal course of business.
Right to Interest on Capital
The partners of a firm can take a 6% interest on any advances made by them to the firm. They are not entitled to any interest on the capital contribution made by them but in case they wish to take an interest in the capital, they can do so from the profits of the firm.
Duties of the Partners Inter-se
The partners of a firm must act in good faith with each other and this bestows certain duties on them:
Duty to Act in Good Faith -Section 9
The partners are expected to perform their general duties in good faith for the greatest common advantage of the firm and to be faithful to each other.
Duty to Render True Accounts- Section 9
The partners must not conceal any information regarding the business from the other partners. It is the duty of every partner to render true accounts of the firm and provide full disclosure regarding the business of the firm.
Duty to Act Diligently- Section 12 (b)
Every partner of the firm must act diligently. Any wilful neglect by any partner makes them liable to indemnify the other partners for any losses incurred (Section 13 (f)).
Duty to Indemnify for Fraud- Section 10
All the partners of a firm have a duty to indemnify the firm for any losses caused by their wrongful actions or fraud committed by them. Since the firm is held liable for the actions of the partners, the partners must indemnify each other for any losses caused.
Duty to not Compete- Section 16 (b)
The partners must not make any profits by undertaking any competing business. Any such profits made by them must be accounted for to the firm.
Duty Regarding the Property of the Firm
The partners must use the property of the firm only for the purpose of the business of the firm. It must not be used for a personal purpose since the property is collectively owned by all the partners and the firm.
The Duties of the Partner
The following are the duties of a partner
One must always act in good faith.
One must be diligent
One must not compete
One must always render true accounts.
One must use the property of the firm properly.
One must not earn personal profits
One must indemnify any fraud.
FAQs on Relation of Partners to One Another
1. What is the citizenship act under Indian law?
The Indian nationality law dictates that the person born between the time period of 26 January 1950 to 1 July 1987 in India are automatically the citizens of the country by birth, regardless of the nationalities of the birth parents.
The two main pieces of legislation governing these requirements are the citizenship act of 1955 and the constitution of India.
Citizenship was granted to the child if the child is born in between the time period of 1 July 1987 to 3 December 2004, even if one of the parents is Indian.
The individuals born in this country with both the parents being Indian, then they become the citizen by default.
The individual shall receive citizenship only if both the parents are Indian citizens or if one of the parents is an Indian citizen, even if the other one is a non-Indian or a migrant.
The foreign individuals become the citizens of India by naturalisation after staying here for at least 12 years and by renouncing their previous nationalities.
2. What is the consumer protection act, 2019?
The consumer protection act was first introduced in the year 2019. This act mainly focuses on the consumer. The consumer has the power to have transparency. The government of India also has a draft called the advertising code. This advertising code gives the consumer protection against false advertisements or anyone trying to fool the crowd by doing the reviews that are paid. The one advantage of the advertising code is that it can be applied to all print media, social media, etc.
The act of consumer protection is made compulsory for all e-commerce businesses running via the internet. The e-commerce business also needs to show the origin of the country the business is operated from for further protection.
The Rights of the Consumers
The consumer protection bill has the following rights given to the consumer.
One must be informed of the quantity, quality and purity, standards, and the price of the goods and services.
One must be assured to have access to a variety of services and goods at competitive prices.
One must be protected against the marketing of hazardous goods and services that are harmful to the property of life.
One must seek redressal against unfair as well as restrictive trade practices.
The Essential Commodities Act:
This act was established to make sure that some of the commodities if obstructed would affect the lives of the normal citizens of the country. Like the black marketing of drugs, fuels etc.
The essential commodities act was first introduced in the year 1955 and the government has been regulating the supply and production of the commodities. Anything declared as essential will be available for the citizens for fair and reasonable prices.
The government can fix the price of any commodity that is essential as minimum support price(MSP).
The items that come under the act of essential commodities are:
Petroleum and petroleum products
These items are not fixed, if the situation is improved, the commodity will be removed from the essential list by the government.
If the government finds any commodity is short in its supply or if the price is hiking, it will notify holders of these stocks for a specific period. If anyone trades this good illegally or tries dealing with wholesalers and retailers, the state can impose restrictions. Once it does, the traders are instructed to sell the commodity into the market and not withhold any stocks. The start can also conduct raids. The stocks that are in excess shall be auctioned or sold in fair-price shops.
In the year 2020, The finance minister gave a suggestion regarding the essential act. It shall be amended the stock limit can be imposed under certain circumstances such as famine or other calamities.
3. What is the role of the Partnership Deed in a Partnership Firm?
The partnership deed defines the roles and duties of the partners pertaining to the general administration and operation of the firm. It gives them the right to determine relationship inter-se. These include aspects like profit sharing, the roles of each partner, etc. This deed can be altered through the express or implied consent of the partners. Section 11 of the Partnership Act states that partners can be restrained from carrying on a business similar to the business of the partnership but such a clause must be expressly stated in the partnership deed.
4. What is the effect on the rights and duties after a change in the Firm?
In case of a change in the constitution of a partnership firm, the rights and duties of the partners are also affected. These changes occur in the following situations:
The predetermined term of the partnership has expired.
There is a change in the constitution of the firm because of the entry/exit of a partner.
Addition of business undertakings other than those originally agreed upon.
Any changes in the partnership and any effects of the same on the rights and duties of the partners must be incorporated in the partnership deed.