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Ministry of Law and Justice

Act nº 9 of 1932

  • Chapter I
  • Chapter II
  • Chapter III
  • Chapter IV
  • Chapter V
  • Chapter VI
  • Chapter 7
  • Chapter 8
  • Schedules
  • Act nº 9 of 1932



[Act, No. 9 of 1932] 1

[8th April, 1932]


An Act to define and amend the Law Relating to Partnership.

WHEREAS it is expedient to define and amend the law relating to partnership. It is hereby enacted as follows:X

1. For Statement of Objects and Reasons and for Report of Special Committee, see Gazette of India, 1931, Pt. V, pg. 31 for Report of Select Committee, see Gazette of India,1932, Pt.V, pg. 7.

The Act has been applied to Berar by the Berar Laws Act, 1941 (4 of 1941).

The Act has been extended to Dadra and Nagar Haveli by Reg. 6 of 1963, section 2 and Schedule 1, to Pondicherry by Reg, 7 of 1963, section 3 and Schedule I, to Goa, Daman and Diu by Reg. 11 of 1963, section 3 and, Schedule, and to Laccadive, Minicoy and Amindivi Islands by Reg. 8 of 1965, section 3 and Schedule

Chapter I

Section 1. Short title and commencement

(1) This Act may be called the Indian Partnership Act, 1932.

1[(2) It extends to the whole of India 2[except the State of Jammu and Kashmir].]

It shall come into force on the 1st day of October, 1932, except section 69, which shall come into force on the 1st day of October, 1933.

1. Substituted by the A.O. 1950 for the former sub-section.

2 . Substituted. by Act 3 of 1951, section 3 and Schedule, for "except Part BStates".

Section 2. Definitions

In this Act, unless there is anything repugnant in the subject or context,X

(a) an "act of a firm" means any act or omission by all the partners, or by any partner or agent of the firm which gives rise to a right enforceable by or against the firm;

(b) "business" includes every trade, occupation and profession;

(c) "prescribed" means prescribed by rules made under this Act;

(d) "third party" used in relation to a firm or to a partner therein means any person who is not a partner in the firm;

and expressions used but not defined in this Act and defined in the Indian Contract Act, 1872 (9 of 1872), shall have the meanings assigned to them in that Act.

Section 3. Application of provisions of Act of 1872

The unrepealed provisions of the Indian Contract Act, 1872, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to firms.

Chapter II

Section 4. Definition of partnership, partner, firm and firm name

"Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.

Persons who have entered into partnership with one another are called individually "partners" and collectively "a firm", and the name under which their business is carried on is called the "firm name".

Section 5. Partnership not created by status

The relation of partnership arises from contract and not from status;

and, in particular, the members of a Hindu undivided family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying on business as such, are not partners in such business.

Section 6. Mode of determining existence of partnership

In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together.

Explanation 1.The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners.

Explanation 2.The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business;

and in particular, the receipt of such share or payment

(a) by a lender of money to persons engaged or about to engage in any business,

(b) by a servant or agent as remuneration,

(c) by the widow or child of a deceased partner, as annuity, or

(d) by a previous owner or part owner of the business, as consideration for the sale of the goodwill or share thereof, does not of itself make the receiver a partner with the persons carrying on the business.

Section 7. Partnership at will

Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is `partnership at will.

Section 8. Particular partnership

A person may become a partner with another person in particular adventures or undertakings.

Chapter III

Section 9. General duties of partners

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.

Section 10. Duty to indemnify for loss caused by fraud

Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.

Section 11. Determination of rights and duties of partners by contract between the partners

(1) Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing.

Such contract may be varied by consent of all the partners, and such consent may be expressed or may be implied by a course of dealing.

Agreements in restraints of trade.

(2) Notwithstanding anything contained in section 27 of the Indian Contract Act, 1872, (9 of 1872), such contracts may provide that a partner shall not carry on any business other than that of the firm while he is a partner.