Rights, Duties and Liabilities of a Partnership

The partnership is created out of an agreement or
contract. As such, every partner has to stick to the duties and enjoy the rights, as mentioned in the Partnership Deed. But when there is no mention in such deed about the rights and duties of the partners, then these are determined in the light of those as given in the Indian Partnership Act, 1932. In this connection, Sec. 11 provides: “Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be expressed or may be implied by a course of dealing. Such contract may be varied by consent of all the partners and such consent might be express or implied by a course of dealing.

The general rights and duties of the partners in a firm are contained in Secs. 9 to 17 of the Indian Partnership Act and might be mentioned as below:

Rights of Partners

Relations of Partners are determined by the agreement between them. Therefore subject to any contract to the contrary, the partners shall have the following rights –

(1) Right to take part in management – Every partner  has a right to take part in the conduct of the business.

(2) Right to share in profits – Partners have the right to share the profits equally in the profit earned and to contribute equally to the losses sustained by the firm.

(3) Right to retire – Every partner has a right to retire from the firm with the consent of all the partners, and if the partnership be one at will, at any time by giving notice to the other partners.

(4) Right not to be expelled – Every partner has a right to continue in partnership and not to be expelled from it even by majority.

(5) Right of access to accounts – Every partner has a right to have access to and to inspect and copy any books of the firm.

(6) Right to interest on capital – No partner is entitled to interest on capital subscribed by him unless there is agreement to that effect. Again, where a partner is entitled toninterest on the capital subscribed by I such interest shall be payable only out of profits.

(7) Right to interest on advances or additional capital – A partner making any payment or advance beyond hisnsubscribed capital, is entitled to interest thereon at the rate of 6% per annum.

(8) Joint owner of Partnership property – Every partner has the right to have the partnership property used exclusively for the purposes of the business of the firm.

(9) Right to indemnity – A partner has the right to benindemnified in the respect of payment made or liability incurred by him on behalf of the firm.

(10) Right of an incoming partner – An incoming
partner will not be liable for any debts or liabilities of the firm before he became a partner.

(11) Powers in emergency – A partner has authority, in an emergency, to do all such acts for the purpose of protecting the firm from loss as would be done by a person of ordinary prudence, in his own case, acting under similar circumstances.

Duties and liabilities of a partner

(1) To indemnify the firm – Every partner is bound to indemnify the firm for any loss caused to it by his wilful neglect or fraud in the conduct of the business of the firm.

(2) Not to make any Secret profits – A partner should not make any secret profits by way of commission. If he does so, he will have to surrender to the firm all the secret profits earned by him.

(3) To act within scope of authority – Every partner
must act within the scope of the actual authority conferred upon him.

(4) Common advantage – Every partner is bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the business.

(5) Due diligence – Every partner is bound to attendndiligently to his duties in the conduct of the business.

(6) To share losses – Every partner has to share equally the losses of the firm unless otherwise agreed upon.

(7) Not to transfer interest – No partner can assign or transfer his interest in the firm without the consent of all the other partners.