Determination of Rights and Duties of a Partner by contract between the Partners :
Subject to the provisions of this act, the mutual rights and duties of a partner of the firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing.
— Section 11 (Indian Partnership Act, 1932)
Mutual Rights Of The Partners OR Rights of Partners inter se :
Rights of the partners depends upon the provision of their agreement . But subject to their agreement, the law confers the following rights of a partner :
1. Right to take part in business [ Section 12(a) ].
Under Section 12(a) of Indian Partnership Act, 1932, it has been specified that every partner has a right to take part in the conduct of business, unless and untill there is any specified agreement signed among the partners.
2. Right to be consulted [ Section 13(c) ].
Every partner has the right to be consulted in any matter regarding the business and therefore has the right to express his views while taking any decision for the firm.
3. Right to access books [ Section 12(d) ].
Every partner has the right to access the books. Books here doesn’t only means the accounting books, but it also includes right to access the secret books, that may contain any confidential information about the business.
4. Right to Indemnity [ Section 13(e) ].
Section 13(e) of Indian partnership Act says that the firm shall indemnify a partner in respect of payments made and liabilities incurred by him.
- In ordinary or proper conduct of the business, and
- in doing such act in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances.
5. Right to share profits [ Section 13(b) ].
According to Section 13(b) of Indian Partnership Act, 1932, ” the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm “.
Therefore, unless there is a special agreement, partners have to share profits equally.
6. Right to receive interest on capital and advances [ Section 13(c) & Section 13(d) ].
- Section 13(c) says that where a partner is entitled to interest on the capital subscribed by him, such interest shall be payable only out of the profits. Therefore, it is the right to receive profit share as an interest on capital.
- Also, Section 13(d) says, ” a partner making for the purpose of business, payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six percent per annum.
7. Right to remuneration [ Section 13(a) ].
Remuneration means Money paid for some service or work.In simple words, it can be called salary or wage.
According to Section 13(a), ” a partner is not entitled to receive remuneration for taking part in the conduct of the business “.
This is because in a partnership, all partners work together to earn profits.That profit is shared among them.Hence, a partner has the right to share profit. But a partner can’t simply ask for the salary or wage for his work for the firm unless specified in the argument.
8. Right to stop the admission of new partner.
It is the right of the partner to be consulted about adding a new partner. Consent of all the partners is required while taking any such decision.
9. Right to retire.
Partners have the right to retire, either with the consent of partners or in the case of partnership at will. In partnership by will retiring partner have to give notice about his retirement to other partners.
10. Right of not to be expelled.
A partner can’t be simply expelled by the firm. Consent of majority is required. Also, it needs to be proved that this action is taken in good faith and for the benefit of the firm.
11. Right of outgoing partner to carry on competing business.
An outgoing partner can carry on competing business. But it should not be associated to the firm by any means ( like firm name, must not represent the firm, or by soliciting the firm’s customer, etc ).
12. Right to share subsequent profits.
If even after the retirement of a partner, his property or capital is still being used by the firm, then the partner have the option, either to have a share of profit in the firm or receive interest at 6 % per annum.
Mutual Duties of the partner OR Duties of the partner inter se :
The main duties of the partners are :
1. Duty of absolute good faith [ Section 9 ].
Section 9 of Indian Partnership Act, 1932 provides, ” Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative “.
Thus, all partners must act in good faith of the firm. Also, they must use their skill and knowledge for the benefit of the firm.
2. Duty of not to compete [ Section 16(b) ].
Section 16(b) says that if a partner carry on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all the profits made by hum in that business.
Also, if that partner faces loss in competing business, then old firm won’t be liable for this.
3. Duty of due Diligence [ Section 12(b) & Section 13(f) ]
According to Section 12(b), ” Every partner is bound to attend diligently to his duties in the conduct of the business “.
Also, Section 13(f) says that, a partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm.
Therefore, a partner shall act diligently for the firm.
4. Duty to indemnify for fraud [ Section 10 ].
According to Section 10, Every partner shall indemnify the firm for any loss caused to it by his fraud in conduct of the business of the firm.
Hence, if a partner deceives the firm, then he will be held liable to indemnify.
5. Duty to render true accounts [ Section 9 ].
Section 9 tells that partners are bound to render true accounts and full information of all things affecting the firm.
Thus, it’s the duty of partner to be true to other partners. Also, he shouldn’t provide fake information to the firm.
6. Duty to use the Property properly [ Section 15 ].
Section 15 of Indian Partnership Act, 1932 says that, Subject to contract between the partners, the property of the firm shall be held and used by the partners exclusively for the purposes of the business.
Thus, partner must use the property of the firm properly.If not done so,he shall be made liable for the losses incurred by the firm due to this concern.
7. Duty to account for personal profits [ Section 16 ].
In section 16, it has been said that if the partner derives profits for himself from any transaction of the firm then he shall pay it to the firm. Also, if the partner is doing the same kind of business, then the profits earned by him must be paid to the firm.