What are the various rights and duties of a partner under, The Partnership Act?
Various rights and duties of a partner under ‘The Partnership Act’ : Subject to contract between the partners. ‘The Partnership Act’ confers the following rights upon the partners of a firm:
Right to take part in the conduct of the business: Every partner, irrespective of the amount of capital contributed, has an inherent right to take part in the conduct of the business of the firm. The right of participation is available to each partner.
Right to be consulted: Every partner has a right to be consulted and heard before any matter is decided, Any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners. But no change can be made in the nature of the business or the constitution of the partnership, e.g., admission of a new partner without the consent of all the partners. The partnership deed may provide consent of all the partners in all matters or that all matters shall be decided by majority opinion. The majority powers should be exercised in good faith for the benefit of the firm.
Right of access to books: Every partner has a right to have access to and inspect and copy any of the books of the firm.
Right to share the profits: Every partner, irrespective of the amount of capital contributed or business expertise, has a right to share equally in the profits earned by the firm.
Right to interest on capital: Where a partner is entitled to interest on capital subscribed by him, such interest shall be payable only out of profits.
Right to interest on advances: Where a partner makes, for the purpose of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, he is entitled to interest thereon at the rate of six per cent per annum.
Right to indemnity. Every partner has a right to claim indemnity from the firm in respect of payments made or liabilities incurred by him: — In the ordinary and proper conduct of the business, and
— In doing such act, ‘in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances.
Duties of Partners:
The duties of partners can be studied under the following two heads :
- Absolute duties.
- Qualified duties.
Absolute duties: These duties are imposed by law and cannot be varied by agreement among the partners.
The following are the absolute duties of partners:
Duty to carry on the business to the greatest common advantage: It implies that every partner must use his knowledge and skill for the benefit of the firm and not for his personal gain. He must conduct the business with the best of his ability and secure maximum benefits for the firm.
Duty to be just and faithful inter-se: Every partner must be just and faithful to his co-partners. He must observe utmost good faith and fairness towards other partners of the firm.
Duty to render true accounts: Every partner must render true and proper accounts to his co-partners. No partner should think of making a secret profit at the expense of the firm.
Duty to provide full information: Every partner must give full information of all things affecting the firm to his co-partners. A partner, being an agent of other partners, must not conceal any information concerning the firm from the other partners.
Duty to indemnify for loss caused by fraud: Where a partner acts bonafide, the loss caused by his neglect or want of skill or omission is borne by the firm. But when the loss is caused by fraud committed against a third party by a partner, the same must be recovered from the guilty partner and cannot be shared among all the partners.
Duty to be liable jointly and severally: Every partner is liable, jointly with all the other partners and also severally, to third parties for all acts of the firm done while he is a partner. The liability of all the partners is not only joint and several but is also unlimited.
Duty not to assign his interest: No partner can assign or transfer his partnership interest to any other person so as to make him a partner in the business without the consent of all other partners. He can, however, assign his share of the profit and his share in the assets of the firm but the transfere shall not have any right to interfere in the conduct of the business.
Qualified duties: Qualified duties are those which depend upon the contract amongst the partners and only in the absence of a contract to the contrary, these duties, as laid down by The Partnership Act, are applicable. Subject.to. contract between the partners,
The Partnership Act prescribes the following duties of partners.
Duty to attend diligently to his duties: Every partner is bound to attend diligently to his duties in the conduct of the business.
Duty to work without remuneration: A partner is not entitled to receive any remuneration for taking part in the conduct of the business.
Duty to contribute to the losses: The partners are bound to contribute equally to the losses sustained by the firm, irrespective of the amount of capital contributed by each one of them.
Duty to indemnify for willful neglect: Every partner is under a duty to indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm. An act done in good faith and bonafide or a mere error of judgement cannot be termed as willful neglect.
Duty to use firm’s property exclusively for the firm: It is the duty of every partner to use the property of the firm exclusively for the purposes of the business. No partner should use partnership property for his personal benefit.
Duty to account for personal profits derived: If a partner derives any personal profit for himself from any transaction of the firm or from the use of the property or business connection of the firm or the firm’s name, it is his duty to account for that profit and pay it back to the firm.
Duty not to compete with the business of the firm: A partner must not carry on arty business which is similar, to or likely to compete with the business of the firm. If he does that, he is bound to account for and pay to the firm all profits made by him in that business. However, a partner may carry on a non-competing business and retain the profits of that business to himself.