Chapter: 1 The Indian Partnership Act 1932

The Indian Partnership Act 1932

Objective

In this unit we intend to give an overview of what we mean by 'partnership'. The concept of partnership is normally considered applicable to business concerns. However, a partnership can also be formed between professionals, like Doctors, Chartered Accountants, and Architects etc.

Introduction

In this context the definition of "business" as provided under the Indian Partnership Act 1932 (Partnership Act - for short) is relevant. As per S. 2 (b) of the Partnership Act, "business" includes every trade, occupation and profession.

As far as the health professionals are concerned certain provisions of Partnership Act, may be considered to be relevant. The same are briefly dealt with as follows:

Section 2 (a) - "Act of a Firm"

As per Section 2(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.

An "act of a firm" may be illustrated by examples. Suppose A, B & C are partners. A on behalf of the firm enters into a contract with a third party. If the third party commits a breach of the contract, the firm may sue to enforce the contract. On the other hand if the firm commits a breach of contract, the third party would be entitled to hold the firm liable for the consequences. The contract between A on behalf of the firm and the third party would be an act of the firm.

Section 2 (b) - Business

As per Section 2(b) of the Act "business" includes every trade, occupation and profession.

The definition of "business" in the Partnership Act is quite important as the element of business is the motive force which leads to the formation of partnership, as may be seen in the definition "Partnership" given under section 4 of the Act.

The element of "business" is one of the three requisites in the definition of "Partnership" given under the same section.