Page 153 - DMGT102_MERCANTILE_LAWS_I

Unit 11: Types of Partners

5. Transfer of interest or share by a partner. If a partner transfers, in any way (e.g., by sale, Notes
mortgage or charge), his whole interest in the partnership to a third party (outsider) or
allows his share to be charged in execution of a decree against him or allows the same to be
sold for arrears of land revenue or for charges recoverable as land revenue, the court may
dissolve the partnership. The transfer of a part of his share by a partner to any third party is
not permissible unless otherwise agreed. A partner can, however, transfer even the whole

of his share to a partner in the firm, because no new partner is introduced thereby.
6. The court can also dissolve partnership where the business of the firm cannot be carried

on save at a loss. The court can order dissolution even though the partnership is for a fi xed
period [Rehmat-un-nisa-v. Price, 42 Bom. 380].
7. Just and equitable. The court can order dissolution on any other ground which in the

opinion of the court is a fit ground for dissolution of partnership. Dissolution on this
ground has been granted in case of deadlock in the management, disappearance of the
substratum of the business, partners not on speaking terms, etc.

Task Arjun, a partner in a fi rm was found guilty of embezzlement of funds belonging to
a client. The other partner filed a suit for the dissolution of the firm on the ground that it is

just equitable that the firm be dissolved. Would he succeed?
11.4 Overview of the Limited Liability Partnership Act, 2008

As we know a Limited Liability Partnership firm (“LLP”) is a form of business organisation with

each partner’s liability limited to the contribution made by that partner in relation to the LLP,
except in case of fraud, malpractice, wrongs, etc., in which case liability that can attach to the
relevant partner may be unlimited liability.
Much awaited and talked about “Limited Liability Partnership Act, 2008” ultimately received the
assent of the President of India on 7th January 2009. This piece of legislation is especially useful
and beneficial to small traders, businessmen and professionals. It has opened up an altogether

new vista for the small entrepreneurs, service providers and professionals who are afraid of
various compliances of the bulky Companies Act, 1956.
As far as professionals are concerned (Lawyers, Chartered Accountants, Company Secretaries,
Cost & Works Accountants), it has really opened a new arena as almost all the professional bodies
restrict conducting of the professional practice in corporate umbrella, though partnership form of
organization is not prohibited. Thus, with the enactment of the LLP Act such professionals and
small entrepreneur, can take almost all the major benefits of Corporates but at the same time will

not be subject to the vagaries of various compliances of the Companies Act, 1956.
The Limited Liability Partnership Act, 2008 has all the tapping of a Corporate Entity i.e., all the

benefits of Private/Public Limited Company (except to approach the Capital market and also
issuance of various corporate debt and equity instruments) are available to a Limited Liability
Partnership Firm ( LLP Firm).
Agency: Every partner is an agent of the LLP and not of the other partners.

Unauthorized Acts: An LLP is not bound by unauthorized acts of any partner in dealing with
a third person provided such third person is aware that the acts are unauthorized; or does not
know or believe that the partner is a partner of the LLP.
Wrongful Acts or Omissions: An LLP is liable for wrongful acts or omissions of partners in
the course of business of the LLP or with its authority – The partner(s) committing such act
or omission will be personally liable – Other partners not to be liable for such wrongful act or

LOVELY PROFESSIONAL UNIVERSITY 147