INDIAN PARTNERSHIP ACT, 1932
CHAPTER I PRELIMINARY
1. Short title, extent and commencement 1
2. De nitions 2
3. Application of provisions of Act 9 of 1872 2
CHAPTER II
THE NATURE OF PARTNERSHIP
4. De nition of “partnership”, “partner”, “ rm” and “ rm name” 3
5. Partnership not created by status 4
6. Mode of determining existence of partnership 4
7. Partnership at will 5
8. Particular partnership 6
CHAPTER III RELATIONS OF PARTNERS TO ONE ANOTHER
9. General duties of partners 6
10. Duty to indemnify for loss caused by fraud 7
11. Determination of rights and duties of partners by contract between the partners 7
CHAPTER IV
CHAPTER V
CHAPTER VI
DISSOLUTION OF A FIRM
39. Dissolution of a rm 20
40. Dissolution by agreement 20
41. Compulsory dissolution 20
42. Dissolution on the happening of certain contingencies 21
43. Dissolution by notice of partnership at will 21
44. Dissolution by the Court 21
45. Liability for acts of partners done after dissolution 22
46. Right of partners to have business wound up after dissolution 22
47. Continuing authority of partners for purposes of winding up 22
48. Mode of settlement of accounts between partners 23
49. Payment of rm debts and of separate debts 24
50. Personal pro ts earned after dissolution 24
51. Return of premium on premature dissolution 24
52. Rights where partnership contract is rescinded for fraud or misrepresentation 24
53. Right to restrain from use of rm name or rm property 24
54. Agreements in restraint of trade 25
55. Sale of goodwill after dissolution
CHAPTER VII
REGISTRATION OF FIRMS
56. Power to exempt from application of this Chapter
57. Appointment of Registrars
58. Application for registration
59. Registration
60. Recording of alterations in rm name and principal place of business
61. Noting of closing and opening of branches
62. Noting of changes in names and addresses of partners
63. Recording of changes in and dissolution of a rm
64. Recti cation of mistakes
65. Amendment of Register by order of Court
66. Inspection of Register and led documents
67.
68.
70.
CHAPTER VIII
SUPPLEMENTAL
72.
73.
Indian Partnership Act, 1932
[9 OF 1932]1
An Act to define and amend the law relating to partnership. WHEREAS it is expedient to define and amend the law relating to partnership; It is hereby enacted as follows:—
CHAPTER I PRELIMINARY
Short title, extent and commencement.
1. (1) This Act may be called the Indian Partnership Act, 1932.
2[(2) It extends to the whole of India 3[***].]
(3) It shall come into force on the 1st day of October, 1932, except section 69, which shall come into force on the 1st day of October, 1933.
STATE AMENDMENTS
DADRA AND NAGAR HAVELI
Section 1(3)
Substitute the following:
“(3) It shall come into force at once except section 69 which shall come into force on the 1st day of July, 1966.”— [Vide Dadra and Nagar Haveli (Laws) Regulation, 1963, w.e.f. 1-7-1965]
GOA, DAMAN AND DIU
Section 1(3)
Substitute the following:
“(3) It shall come into force at once except section 69, which shall come into force on the 1st day of January, 1965.” — [Vide Goa, Daman and Diu (Laws) No. 2 Regulation, 1963, w.e.f. 19-12-1963.]
1. Dated 8-4-1932.
2. Substituted by the Adaptation of Laws Order, 1950.
3. Words “except the State of Jammu and Kashmir” omitted by the Jammu and Kashmir Reorganisation Act, 2019, w.e.f. 31-10-2019. 1
LACCADIVE, MINICOY AND AMINDIVI ISLANDS
Section 1(3)
Substitute the following:
“(3) It shall come into force at once except section 69, which shall come into force on the expiry of a period of one year from the date of commencement of the rest of this Act”.[Vide Laccadive, Minicoy and Amindivi Islands (Laws) Regulation, 1965, w.e.f. 1-10-1967.]
PONDICHERRY
Section 1(3)
Substituted the following:
“(3) It shall come into force at once except section 69, which shall come into force on the 1st day of July, 1964.”— [Vide Pondicherry (Laws) Regulation, 1963, w.e.f 1-10-1963.]
Definitions.
2. In this Act, unless there is anything repugnant in the subject or context,—
(a) an “act of a firm” means any act or omission by all the partners, or by any partner or agent of the firm which gives rise to a right enforceable by or against the firm;
(b) “business” includes every trade, occupation and profession;
(c) “prescribed” means prescribed by rules made under this Act;
(d) “third party” used in relation to a firm or to a partner therein means any person who is not a partner in the firm; and
(e) expressions used but not defined in this Act and defined in the Indian Contract Act, 1872 (9 of 1872), shall have the meanings assigned to them in that Act.
STATE AMENDMENT
MAHARASHTRA
Section 2
After clause (c), insert the following clause:
‘(c-1) “Registrar” means the Registrar of Firms appointed under sub-section (1) of section 57 and includes the Deputy Registrar of Firms and Assistant Registrar of Firms appointed under sub-section (2) of that section;’— [Vide Indian Partnership (Maharashtra Amendment) Act, 1984, w.e.f. 1-1-1985]
Application of provisions of Act 9 of 1872.
3. The unrepealed provisions of the Indian Contract Act, 1872, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to firms.
CHAPTER II
THE NATURE OF PARTNERSHIP
Definition of “partnership”, “partner”, “firm” and “firm name”.
4. “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called individually “partners” and collectively a “firm”, and the name under which their business is carried on is called the “firm name”.
COMMENTS
SECTION NOTES
Definition of “Partnership”
The essential ingredients of “partnership” are as follows:
Relation: It is the relation arising from the contract (See Section 5).
Two or more Persons: Such a contractual legal relation is between persons (Note: ‘persons’ in plurality-two or more persons). Such persons are individually known as “partners” and collectively known as “ rm”. [See also Section 5 and Section 6].
Pro t-sharing agreement: Such persons have agreed to share the pro ts of a business. [See also Explanation 1, and Explanation 2, below Section 6]
Business: The pro ts shared are from a business. “Business” includes every trade, occupation and profession. [See Section 2(b)]
Mutual agency: Such business is carried on by all or any of them acting for all. (See Section 6 & Section 18)
Firm Name: The name under which their business is carried on is called the “ rm name”.
CASE LAWS
Proprietary Concern Not a Partnership - The Supreme Court clari ed that a proprietary concern is distinct from a partnership as de ned under section 4 of the Indian Partnership Act, 1932. A proprietary concern, owned solely by an individual, cannot be equated with a partnership, which requires an agreement between two or more persons to share pro ts. The judgment emphasized that proprietary businesses are not governed by partnership laws and are solely the responsibility of the proprietor.—Raghu Lakshminarayanan v. Fine Tubes AIR 2007 SC 1634.
Partnership Restricted to Individuals - The Supreme Court held that under section 4, a partnership can only be formed by individuals and not by an HUF or other collective entities. An HUF, being a uctuating body of individuals, cannot enter into a partnership directly or through a nominee. The Court clari ed that any payment to a partner, even if they represent an HUF, is treated as payment to the individual partner for legal purposes, and such arrangements cannot alter the rm’s structure or obligations under the Act.—Rashik Lal and Co. v. Commissioner of Income-tax AIR 1998 SC 401.
Firm is Not a Legal Person - The Supreme Court ruled that under section 4, a “ rm” is not recognized as a legal person and cannot enter into a partnership with another rm, a Hindu Undivided Family (HUF), or an individual. The term “persons” in the Act refers to natural or arti cial legal persons, and a rm does not qualify as such. Consequently, a partnership purportedly constituted between rms or HUFs is invalid, 3
S. 6 INDIAN PARTNERSHIP ACT, 1932 4
and its registration under tax laws is impermissible.—Dulichand Laxminarayan v. Commissioner of Income-tax, Nagpur AIR 1956 SC 354.
Definition of Partnership - Proprietary Concerns Excluded - The Supreme Court clarified that a proprietary concern does not fall within the definition of a “partnership” under Section 4. A proprietary concern is distinct, as it is owned solely by an individual, whereas a partnership involves an agreement between two or more persons to share profits and manage a business. The Court emphasized that vicarious liability under penal statutes applies only to partnerships meeting the statutory definition and not to proprietary concerns.—Raghu Lakshminarayanan v. Fine Tubes 2007 CRI. L. J. 2436.
Partnership not created by status.
5. The relation of partnership arises from contract and not from status; and, in particular, the members of a Hindu undivided family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying on business as such are not partners in such business.
COMMENTS
SECTION NOTES
The relation of partnership arises from contract and not from status.
The members of a Hindu undivided family carrying on a family business as such are not partners in such business.
A Burmese Buddhist husband and wife carrying on business as such are not partners in such business.
STATE AMENDMENT
GOA, DAMAN AND DIU
Section 5 - For the words “Burmese Buddhist husband and wife carrying on business as such”, the words “a husband and wife under the regime of communion of property carrying on business as such” be substituted.— [Vide Indian Partnership (Goa, Daman and Diu Amendment) Act, 1966, w.e.f. 22-8-1966]
Mode of determining existence of partnership.
6. In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together.
Explanation 1.—The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners.
Explanation 2.—The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned
by a business, does not of itself make him a partner with the persons carrying on the business;
and, in particular, the receipt of such share or payment—
(a) by a lender of money to persons engaged or about to engage in any business,
(b) by a servant or agent as remuneration,
(
c) by the widow or child of a deceased partner, as annuity, or
(d) by a previous owner or part owner of the business, as consideration for the sale of the goodwill or share thereof, does not of itself make the receiver a partner with the persons carrying on the business.
COMMENTS
SECTION NOTES
Pro t-sharing by a group of persons or the receipt of a share of pro ts of a business is not the clincher for determining whether a person is a partner or whether a group of persons is or is not a rm.
To determine these questions, regard shall be given to the real relation between the parties, as shown by all relevant facts taken together.
The sharing of pro ts or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners.
The receipt by a person of a share of the pro ts of a business, or of a payment contingent upon the earning of pro ts or varying with the pro ts earned by a business, does not of itself make him a partner with the persons carrying on the business.
In particular, the receipt of such share or payment in the following cases does not of itself make the receiver a partner with the persons carrying on the business —
(a) receipt of share of pro ts of a business by a lender of money to persons engaged or about to engage in any business,
(b) receipt of share of pro ts of a business by a servant or agent as remuneration,
(c) receipt of share of pro ts of a business by the widow or child of a deceased partner, as annuity, or
(d) receipt of share of pro ts of a business by a previous owner or part owner of the business, as consideration for the sale of the goodwill or share thereof.
Partnership at will.
7. Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is ‘partnership at will’.
INDIAN PARTNERSHIP ACT 1932 –BARE ACT WITH SECTION NOTES
AUTHOR : TAXMANN'S EDITORIAL BOARD
PUBLISHER : TAXMANN
DATE OF PUBLICATION : FEBRUARY 2025
EDITION : 2025 EDITION
ISBN NO : 9789364555135
NO. OF PAGES : 68
BINDING TYPE : PAPERBACK
DESCRIPTION
Indian Partnership Act 1932 [Bare Act with Section Notes] by Taxmann provides a concise and updated consolidation of India's partnership law. It explains partner relations, registration, rights and duties, and dissolution procedures, accompanied by section-wise notes on judicial interpretations, state amendments, and practical applications in the 2025 edition. This book is intended for the following audience:
• Law Students & Academics
• Legal Professionals
• Business Owners & Chartered Accountants
• Judicial & Quasi-Judicial Authorities
The Present Publication is the 2025 Edition, covering the amended and updated text of the Indian Partnership Act [Act No. 9 of 1932], with the following noteworthy features:
• [Bare Act & Section Notes] Presents the statute with clear, concise commentary referencing leading judgments
• [Up-to-date Amendments] Incorporates Central and State amendments, essential for practitioners across jurisdictions
• [Pre-amendment Provisions] Includes earlier text in amendment footnotes, clarifying the legal position before changes
• [Detailed Commentary] Offers explanations, cross-references, and case law to highlight practical implications
• [Latest Judicial Guidance] Summarises recent Supreme Court and High Court rulings on key provisions
• [User-friendly Layout] Features thematic headings, chapter-wise arrangement, and a comprehensive Subject Index
• [Practical Insights] Covers registration, dissolution, admission and retirement of partners and related procedures