Rights and Duties of Partners in a Partnership Firm

The mutual interactions between the partners of a firm are established by an agreement between the partners. Every partner involved in the firm’s business has mutual rights and obligations as a result of this. The requirements governing the mutual relations of all partners are laid out in Sections 9 to 17 of the Indian Partnership Act of 1932. These relationships are governed by a pre-existing contract between them, which may be implied or expressed through the course of business. Depending on the approval of all parties, the agreement may change. In this post, we take a closer look at the numerous rights and responsibilities of partners in a partnership firm.

 

Rights and Duties of Partners in a Partnership Firm

 

Rights of a Partner

The rights of a partner in a partnership firm are as follows.

Section 12(a): Right to take part in the conduct of the Business

Because a partnership business is a business of the partners, all of the partners in a partnership firm have the right to participate in the business done by the firm, and their management rights are often coextensive. In such cases, the Court of Law can intervene if a partner’s management power is harmed and the individual is unlawfully barred from participating. By injunction, the Court can and will prevent the other partner from doing so. Other remedies for a partner who has been wrongly denied the opportunity to participate in management include a dissolution suit, a suit for accounts without requesting dissolution, and so on.

Unless there is an existing contract between the spouses to the contrary, the law’s previously indicated rules will apply. In partnership agreements, it’s typical to discover a provision granting only limited management authority to a specific partner or a provision stating that the partnership’s control would stay vested in one or more partners to the exclusion of others. In such a circumstance, the Court of Law would be reluctant to intervene with the management of such partner (s) unless it could be demonstrated that something was done illegally or in violation of trust between the partners.

Section 12(c): Right to be consulted

When a disagreement emerges among the partners of a firm on the firm’s business, the views of the majority of the partners will be decided. Before a decision is reached, each partner in the firm has the right to express his or her view. However, no modifications to the firm’s business can be made without the permission of all partners engaged. As is customary, the majority opinion of the partners will win out. When there is a change, such as in the firm, the majority rule does not apply. In such cases, the partners’ consent must be given unanimously.

Section 12(d): Right of access to books

Every partner in the firm, whether an active or sleeping partner, has access to all of the partnership firm’s books. The partner has the right to inspect the document and, if necessary, make a copy of it. This privilege, however, must be legitimately exercised.

Section 13(a): Right to remuneration

As a result of participating in the firm’s business, no partner of the firm is entitled to receive any remuneration in addition to his share of the profits. However, this rule can be overridden by an express agreement or a series of dealings, in which case the partner is entitled to compensation. Thus, even in the absence of a contract, a partner may claim income if it is receivable as a result of the firm’s continuous use. In other words, when it is customary to pay a partner remuneration for operating the partnership firm’s business, the partner may claim it even if there is no contract for the payment of the salary.

It is usual for partners to agree that a managing partner will be compensated in addition to his share, salary, or commission for the time and effort he will devote to the firm’s operations.

Section 13(b): Right to share profits

All revenues earned in the business are divided equally among the partners. Similarly, the losses incurred by the partnership firm are shared equally. The amount of a partner’s share must be determined by asking whether the partners have reached an agreement in this regard. If there is no agreement, it is presumed that the profit shares are equal, and the party asserting uneven shares will bear the burden of showing otherwise.

There is no correlation between the percentage of profits that the partners will share and the percentage that they contributed to the partnership firm’s capital.

Section 13(c): Interest on capital

If a partner subscribes to interest on capital that is owed to the partner under the partnership deed, the interest will only be paid out of profits in this situation. In general, unless there is an agreement or usage to the contrary, interest on the capital subscribed by partners is not permissible. The essential idea of this provision of law is that a partner in a business is not a creditor of the firm, but an adventurer, when it comes to the capital brought in by the partner.

 

Before a partner can be entitled to interest on money invested in the business, the following conditions must be met.

  1. The practice of a particular partnership or an express agreement to the same effect.
  2. Any custom in the trade to that effect; or
  3. He is entitled to such interest on the capital according to a statutory provision.

Section 13(d): Interest in advances

If a partner makes an advance to the partnership business in excess of the amount of capital he will contribute, he is entitled to interest at the rate of 6% per year. While interest on capital accounts stops accruing upon dissolution, interest on advances continues to accrue until the date of payment. It’s worth noting that the Partnership Act distinguishes between a partner’s capital contribution and his advance to the firm. The partner’s advance is treated as a loan that must be repaid-with interest, whereas the capital interest is only repaid with interest if there is an agreement to that effect.

Section 13(e): Right to be indemnified

All of the firm’s partners have the right to be reimbursed by the firm for payments made and liabilities incurred in the usual and legitimate conduct of the firm’s business. This also includes acting in an emergency to preserve the firm from a loss if the payments, liabilities, and actions are those that a prudent man would make, incur, or perform under identical circumstances.

Section 31: Right to stop the admission of a new partner

In a partnership firm, all of the partners have the power to prevent the entrance of a new partner without the permission of all of the current partners.

Section 32(1): Right to retire

A partnership firm’s partners each have the right to leave the business with the consent of the other partners. In the event of a willful partnership, this can be accomplished by sending a notice to all other partners.

Section 33: Right not to be expelled

Every partnership firm’s partner has the right to stay in the business. A majority of the partners cannot dismiss a partner unless the right is granted by a partnership agreement and utilized in good faith and for the benefit of the partnership firm.

Section 36(1): Right of outgoing partner to carry on a competing business

A partner who leaves a partnership firm may start a business that competes with the firms. The partner may even publicize such conduct, but only if he does so without using the firm’s name, representing himself as carrying on the firm’s business, or courting clients who dealt with the firm before the partner ceased to be a partner.

Section 37: Right of outgoing partner to share subsequent profits

If a partner has died or ceased to be a partner and the remaining partners carry on the firm’s business with the firm’s property without settling their accounts with the outgoing partner or his estate, the outgoing partner or his estate has the right to such share of the profit made since he ceased to be a partner as may be attributable to the use of his share of the firm’s property or inter alia, at his or his representative’s option.

Section 40: Right to dissolve the firm

With the approval of all other partners, a partner in a partnership business has the ability to dissolve the partnership. Where the partnership is at will, however, any partner may terminate the firm by giving written notice to all other partners of his desire to dissolve the firm.Rights and Duties of Partners in a Partnership Firm

Duties of a Partner

In a partnership firm, a partner’s responsibilities are as follows.

Section 9: General duties of a partner

Partners are legally obligated to continue the partnership firm’s operations. The following is a list of a partner’s general responsibilities.

  1. A partner is obligated to carry on the business to the greatest possible benefit of all parties involved.
  2. A partner is expected to be fair and loyal to each other.
  3. A partner is required to provide the genuine account and all information pertaining to the partnership firm to any other partner or his legal agent.

Section 10: Indemnification in the event of fraud

A partnership firm’s partner is accountable to compensate the firm for any losses made to its business or the firm as a result of a partner’s deception in the conduct of the firm’s business, according to Section 10..

Section 13(f): To indemnify for willful neglect

A partner in a partnership firm must compensate the firm for any damages or losses caused by deliberate carelessness in the conduct of the firm’s business, according to the Section.

Sections 12(b) and 13(a): To perform tasks diligently and without compensation.

According to Section 12(b) of the Indian Partnership Act, every partner is legally bound to attend to his duties relating to the conduct of the firm’s business. In addition, Section 13(a) states that a partner is not entitled to compensation for engaging in the general operation of the business. A partner must also share his or her expertise and skills with his or her companions.

Section 13(b): To share losses

A partnership firm’s partners are all responsible for the firm’s injury in the same proportion.

Section 16(a): To account for any profit

If a partner in a partnership firm makes a profit from the firm’s transactions or from the use of the firm’s property or business connections, or from the firm’s name, the partner is required to account for that profit and return it to the firm.

Section 16(b): To account and pay for profits of competing for business

If a partner runs a business that is similar to the firm’s and competes with it, the partner must be responsible for all earnings produced in the business and must pay them to the firm. The partnering firm shall not be held responsible for any business damages.