Introduction: The Indian Association Law/ Partnership Act was promulgated in 1932 and entered into force on October 1, 1932. A company arises from a contract and, therefore, said contract is governed not only by the provisions of the Association Law/ Partnership Act but also by the general contract law
Definition of Partnership: - Kent's vision is "partnership as a contract by two or more competent persons to place their money, labor, efforts and skills or some of them in a legal trade or business and to share the profit and bear loss in certain proportions."Dixon defines a partnership as" Group of people. Opinion of Pollock, "Partnership is a subsisting relationship between people who have agreed to share the profits from a business carried out by all or any of them on behalf of all of them."
Definition: - Section 4 of the Indian Partnership Act or Association Law defines "Partnership" as follows: - Partnership/Association is the relationship between the people who have agreed to share the profits of a business carried out by all or any of them who act to everybody ".
Nature of the Partnership:-
The Association/ Partnership is a form of business organization, in which two or more people come together to conduct some business together. It is an improvement over the "Single Trade" business, where a single individual with his own resources, skills and effort conducts his own business. Two or more people can join together to create an association/ Partnership.
In certain respects, an association/ Partnership is a more suitable form of business organization than a company. The creation of partnership only requires an agreement between several people. While in the case of the company, there are many procedural formalities that must be performed to create a company. In the case of the company, control over the distribution of profits, the holding of meetings and the maintenance of accounts is carried out through legal control. Whereas in a partner firm the partners are the owners of their affairs.
The following are the essential elements of the Partnership: -
1. People who have agreed or interested: - A question that arises in the preliminary stage is that, “who are the people and who can agree on partnership/an association:
(i) Minors: - A minor is not competent to contract the case of Mohori Bibi v / s Damodardass Ghosh-1903: The minor cannot become a partner, but can be admitted to benefit from partnership/society and can share the profits. He cannot be responsible for losses.
(ii) Corporation: - A corporation is a legal person, therefore, the corporation can form a partnership with the condition only if the constitution of the corporation should empower it to form a partnership and not otherwise
(iii) Company: - The company is also recognized as a legal entity in India and cannot form a company. A company that is an owner company or a company registered under the Company Law may very well form a company, but here it is mentioned that the partnership firm is not a legal person, therefore it is not competent to do what. Duli chand v / s CIT, 1956.
(iv) Foreigner: - A national of another country can be a foreign friend or a foreign enemy. A friendly foreigner can enter society, but the latter cannot, except when he is under the protection of that country.
2. To share the benefits of a business: - This line has two parts: 1. To share the benefits and 2. Of a business. However, the explanation of these two terms is as follows:
(i) Business: -This definition is not exhaustive. The existence of a business is essential unless there is no intention to do business and share profits, there can be no association. Therefore, partnership and business goals must be legal. [R.R.Sharma v / s Ruben, 1946]
(ii) Profit distribution: Cox v / s Hickman Case, 1860: Although business revenue sharing is essential. The definition leaves open how and when these benefits will be shared. In order to continue the partnership, the actual existence of the business that the partners undertake with a profit-sharing agreement from this business is necessary.
(iii) Loss distribution Grace V / s Smith-1775, One of the basic conditions for partnership is mutual agency, working for everyone and continuing to work
Conclusion: - In order to form a partnership, there should not only be revenue sharing but there must also be a relationship and principle of the agency. Section 4 of the law in which there must be a physical presence of the actions of the partners with an agreement to share the profits of these businesses is necessary.
0 Comments