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Duties of Partner : Indian Partnership Act

Duties of Partner
Duties of Partner


Liabilities of a Partner for Failure to Perform Duties

The liabilities of a partner arise when they fail to fulfil their duties as stipulated under the Partnership Act. In other words, when a partner acts contrary to their duties as outlined in the Partnership Act, they are held accountable for such actions. The Act delineates certain duties for all partners:

(a) Under Section 9, partners have general liabilities in the following instances:

(i) Failure to conduct the firm's business in the best interest and advantage of all partners.

(ii) Failure to exhibit fairness and fidelity to all other partners.

(iii) Failure to provide true accounts and comprehensive information regarding all matters affecting the firm to any partner or their legal representatives.

(b) According to Section 10, each partner is liable to indemnify the firm for losses resulting from fraud committed by them during the firm’s business operations.

(c) Pursuant to Section 13, partners are responsible for indemnifying the firm for losses incurred due to their willful negligence in conducting the firm’s business.

(d) As per Section 16(a), a partner must account for all profits obtained, even secretly, from any transaction of the firm, use of firm properties, business connections, or the firm’s name.

(e) Under Section 16(b), if a partner engages in business competition with the firm, they are liable to account for and pay the firm all profits earned from such competing business.

(f) All partners are obligated to contribute to the firm's losses in equal proportion unless otherwise agreed upon among the partners.


Joint and Several Liabilities of Partners

As per Section 25, all partners are jointly and severally liable for acts of the firm while they remain partners. An act of the firm, defined under Section 2(a), encompasses any action or omission by all partners, any individual partner, or a firm agent that results in a right enforceable by or against the firm.

In contrast, English law holds partners liable for firm debts and obligations jointly, not severally. However, under specific conditions, partners may have several liabilities:

(a) When a partner commits wrongs in the ordinary course of business or with the authority of other partners, resulting in loss or injury to third parties.

(b) When a partner misappropriates money or property received while acting within their authority or while in the firm's custody in the ordinary course of business. This liability extends to both active and dormant partners, without distinction.

Furthermore, if a partner's implied authority is restricted by agreement with other partners, acts within that implied authority but beyond the partner's actual authority are binding on the firm unless the third party is aware of the restriction.

Liability of a Firm for Wrongful Acts of a Partner

Sections 26 and 27 outline the liability of a firm for wrongful acts or omissions of a partner:

  1. Loss or Injury Caused by Partner: If a partner, acting in the ordinary course of business or with the authority of other partners, causes loss or injury to a third party, the firm is liable to the same extent as the partners.

  1. Cases Requiring Compensation by the Firm:

  • (a) When a partner, acting within apparent authority, receives money or property from a third party and misappropriates it.

In both cases, the firm is liable to compensate for the loss incurred.


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