Page 160 - DMGT407Corporate and Business Laws

Unit 6: Partnership Act and Limited Liability Act

(e) The rights of a firm or its members who have no place of business in the territories to Notes
which the Act extends.
(f) Any suit or claim of set off not exceeding ` 100 in value provided the suit is of such a nature
that it has to be filed in the Small Causes Court. Proceedings incidental to such suits, e.g.,
execution of decrees, are also allowed.

Self Assessment

Fill in the blanks:

3. When an alteration is made in the ……………of the firm or in the location of its principal
place of business, s. 60 requires that the information be sent to the Registrar of Firms.
4. Section 70 provides that any person who signs any statement, amending statement, notice
or intimation as regards a registered firm and as required under the act should be
…………….and complete.
6.3 Partnership Deed or Agreement or Articles of Partnership

A Partnership can be formed either by Oral or Written Agreement. In France and Italy, the law
requires all partnership agreements to be in writing. But in England, USA and India, written
agreement is not compulsory. But in order to avoid misunderstanding and litigation, it is
desirable to enter into a written agreement which is called Partnership deed or agreement. The
partnership deed is required to be stamped according to the provisions of the Stamp Act, 1899.
Each partner should possess a copy of the Deed. The Partnership Deed is not a public document
(in the case of a company, a memorandum of association is a public document) and therefore
binds only third parties so far as they have notice of it. A properly drawn up deed of partnership
contains clauses on the following. (i) Name of the firm. (ii) Names and addresses of the partners.
(iii) Nature of partnership business. (iv) The town and place where the business will be carried
on. (v) The commencement and duration of partnership. (vi) All details to the amount of capital
contributed by each partner. (vii) The proportion in which the profits and losses are to be shared.
(viii) Loans and advances by partners and interest payable thereon. (ix) The amounts that can be
withdrawn by the partners and the rate of interest. (x) Rate of interest, if any, allowed on capital
contribution. (xi) The duties, powers and obligations of all the partners. (xii) Salary, if any,
payable to the partners for managing the firm. (xiii) Maintenance of accounts and audit.
(xiv) The basis of valuation of goodwill on the death or retirement of a partner or the introduction
of a new partner. (xv) Method of admitting a partner. (xvi) The methods by which a partner may
retire and the arrangement for the payment of dues of a retired or deceased partner.
(xvii) Method of operating a bank account. (xviii) Arrangements in case a partner becomes
insolvent. (xix) Conduct and management of business. (xx) Arbitration in matters of dispute
among partners. (xxi) The methods of revaluation of assets and liabilities on admission or
retirement or death of a partner. (xxii) Settlement in the case of dissolution of partnership. (xxiii)
Any other clause or clauses which may be found necessary in any particular kind of business.

Partnership Agreements and Contract Law

Section 3 provides that the unrepealed provisions of the Indian Contract Act, 1872 save insofar
as they are inconsistent with the provisions of this Act, shall continue to apply to firms. Also s.
2(e) provides that “expressions used but not defined in this Act and defined in the Indian Contract
Act, 1872, shall have the meanings assigned to them in that Act”. As a partnership agreement is
a contract, the provisions of the Indian Contract Act, 1872, are applicable to it.

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