Incoming & Outgoing Partners

Table of Contents
Introduction Essentials Introduction of a partner-New Partner Break in Identity of Firm by Addition of New Partners Liability of a Incoming Partner Retirement of a partner Sec 32 (1) A partner may retire, Section 32(1): Retirement in a Partnership-at-Will Notice of Resignation Liability of a Retiring Partner Section 32(2): Obligation of Retiring Partner Section 32(3) (i) Notice of Retirement Effect of Retirement of Partner Retirement of a Partner and Valuation of his Share Expulsion of a partner Insolvency of a partner Dissolution of Partnership Liability of estate of deceased partner Right of outgoing partner to carry on competing business Agreement in Restraint of Trade Remedy for Breach of Agreement Right of outgoing partner in certain cases to share subsequent profits Rights of Retiring Partner Rights and Liabilities of an Outgoing Partner Revocation of continuing guarantee by change in firm Bibliography 2 2 2 2 3 3 4 4 4 5 6 6 6 6 7 7 8 8 8 9 9 9 11 11 11 12

Incoming & Outgoing Partners

Introduction
The law of partnership is contained in the Indian Partnership Act, 1932, which came into force on 1st October 1932 The act is mainly based on English Partnership act 1890 and practically codifies the Indian law of partnership Partnership is defined under Sec- 4 of this act: Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all.

E ssentials
Following are the essentials which are required for a valid partnership: Partnership is an association of two or more persons It must be result of an agreement between two or more persons The agreement must be to carry on some business The agreement must be to share profits of the business Business must be carried on by all or any one of them acting for all

Introduction Partner

of

partner-New

Object of section 31(1): The general idea behind section 31(1) of the Act is that the consent of all the existing partners is required to the introduction of a new partner so that the firm may work harmoniously A new partnership may be by an oral agreement or in writing 1

Break in Identity of Firm by Addition of New Partners

Whenever the constitution of a firm changes by addition of new members as partners, there is a break in the identity of the firm whether or not the name continues to be the same After a change in the constitution of the firm by addition of new partners what formerly was the property of the old firm does not continue to be the property of the old firm When the change in the constitution is merely a paper transaction and not a genuine and real transaction, the court would disregard the change in the constitution of the firm and would regard the property of the old firm in spite of the apparent though real, change in the constitution Where, however, there is a real change in the constitution and the new firm is a new identity there seems to be no justification for the view that whatever was the part of the property of the old firm continues to be its property in spite of such change If the properties could not reach in the hands of the old firm, it could not be attached obviously in the hands of the new firm 2

Incoming & Outgoing Partners

1Meenakshi Achi v P S M S Chettiar, AIR 1957 Mad 8 2 Gouri Sankar v CM, Bank Ltd , AIR 1959 Cat 262