Rights and Duties of Partners in a Partnership Firm–
A partnership agreement establishes communication between participants in a corporation. As a result, each partner taking part in the activities of the firm has joint rights and obligations.
Sections 9 to 17 of the Indian Partnership Act of 1932 outline the regulations controlling all partners’ mutual relationships.
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 partnership business, all partners in a partnership firm have the right to engage in the firm’s operation, and their management rights are sometimes coextensive. In such circumstances, the Court of Law may step in if a partner’s management power is jeopardized and the individual is wrongfully excluded from participating. The Court can and will restrict the other partner from doing so through an injunction. A dissolution suit, a suit for accounts without asking for dissolution, and other remedies are available to a partner who has been wrongfully denied the right to participate in management.
Unless the spouses have an existing contract to the contrary, the law’s previously stated provisions shall apply. A clause assigning only limited management authority to a single partner or a provision declaring that the partnership’s control would remain vested in one or more partners to the exclusion of others is common in partnership agreements. In such a case, the Court of Law would be hesitant to engage with the management of such partner (s) unless it could be proven that anything was done unlawfully or in breach of the partners’ trust.
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 active or passive, has access to the partnership firm‘s books. The partner has the right to view and, if required, copy the document. However, this privilege must be lawfully utilized.
Section 13(a): Right to remuneration
No partner of the firm is entitled to any payment in addition to his share of the profits as a consequence of engaging in the firm’s operation. This provision, however, can be overruled by an express agreement or a sequence of transactions, in which case the partner is entitled to reimbursement. Thus, even in the lack of a contract, a partner may claim revenue if it is due to the firm’s ongoing usage. In other words, if it is usual to give a partner income for conducting the partnership firm’s business, the partner may claim it even though no contract for salary payment exists.
It is common for partners to agree that a managing partner will be rewarded for the time and effort he will commit to the firm’s operations in addition to his share, pay, or commission.
Section 13(b): Right to share profits
All profits made by the company are distributed equally among the partners. Similarly, the partnership firm’s losses are split equally. The amount of a partner’s share must be established by questioning if the partners have agreed on this. If no agreement is reached, it is assumed that the profit shares are equal, and the party claiming unequal shares bears the responsibility of proving otherwise.
There is no relationship between the proportion of earnings that the partners will share and the percentage they contributed to the capital of the partnership business.
Section 13(c): Interest on capital
In this circumstance, if a partner subscribes to interest on capital owing to the partner under the partnership deed, the interest will only be paid out of profits. Interest on capital subscribed by partners is not possible in general, unless there is an agreement or custom to the contrary. When it comes to the capital brought in by the partner, the key principle of this provision of legislation is that a partner in a business is not a creditor of the firm, but an adventurer.
The following requirements must be completed before a partner can be entitled to interest on money invested in the firm.
- The practice of a particular partnership or an express agreement to the same effect.
- Any custom in the trade to that effect; or
- 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 firm that exceeds the amount of capital he will provide, he is entitled to 6% interest per year. While interest on capital accounts ceases to accumulate the following dissolution, interest on advances continues to accrue until payment. It’s important to note that the Partnership Act differentiates between a partner’s capital contribution and his advance to the company. The partner’s advance is considered a loan that must be repaid-with interest, whereas capital interest is only reimbursed with interest if an agreement is in place.
Section 13(e): Right to be indemnified
All of the firm’s partners have the right to be compensated by the firm for payments made and liabilities incurred in the course of the firm’s normal and legal operations. This includes acting in an emergency to protect the company from loss if the payments, obligations, and actions are those that a sensible man would make, incur, or execute in the same circumstances.
Section 31: Right to stop the admission of a new partner
In a partnership business, all partners have the authority to prevent the entry of a new partner without the consent of all present partners.
Section 32(1): Right to retire
Each partner in a partnership firm has the right to exit the company with the approval of the other partners. This can be performed in the instance of a willful partnership by issuing 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.
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.
- A partner is obligated to carry on the business to the greatest possible benefit of all parties involved.
- A partner is expected to be fair and loyal to each other.
- 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.