Introduction of the Partnership Act, 1932

Until the last century, courts used to deal with disputes between business partners in accordance with prevalent customs and usages. However, the provision of the Partnership was contained in the Indian Contract Act,1872. But those provisions were found unsatisfactory, thus repealed. As there is development in trade in India, the necessity of new legislation on partnership is felt.

A partnership is a relationship or arrangement between two or more persons who agreed to share of the business carriers on by all.

Key features of the Partnership Act:

  1. Indian Partnership act is based mainly on the English Partnership Act, 1890.
  2. Partnership Act is based on Chapter 11 of the Indian Contract Act which includes Sec.239 to 266.
  3. Partnership Act comes into existence on 1st Oct. 1932 except Sec.69. Sec.69 comes into existence on 1st Oct 1933.
  4. Partnership is like a business organisation. It does not have any legal entity.
  5. Partnership Act is not exhaustive. Some provisions are in the Indian Contract Act.
  6. The report of Special Committee along with its recommendations, it was further referred to the Select Committee. On the basis of the recommendation of the Select Committee, the Indian Partnership Bill was introduced in the legislature.
  7. Liability of the partners in the partnership firm is unlimited.
  8. Partners are jointly and severely liable. (Take an example – A, B, C are partners in a firm. D is a third party. D has to take 3 Lakhs from the firm, so he sue partner C for 3 Lakhs. Partner C have to give while 3 Lakhs to D. C cannot say that he is liable for only 1 Lakh. C have to pay full amount. After paying D, C can take remaining amount from A and B respectively. Here D has an option to sue only C or he can sue jointly A, B, C.)
  9. Partnership Act is based on Mutual agency. (Principle is liable for the acts of an agent).
  10. If partnership is for banking purpose then the maximum number of partners can be 10, If it is for other purposes then the maximum number of partners can be 20. If members are exceed then partnership shall become illegal and it must be registered under Companies act.


The joint effort of all the partners results in successful completion of all the business tasks. As the work is divided between each of the partners equally, it decrease the burden of work and increase the efficiency of partners. Therefore, the partnership is a good way to carry on business in comparison to single person owned company.

This article is authored by Prachi Gupta.

Also Read – The Passport Act, 1967

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