The Indian Partnership Act, 1932 governs formation, operation, dissolution of partnerships, defining rights and obligations.

What is the Indian Partnership Act 1932?

Introduction  –

The Indian Partnership Act, 1932 governs the formation, operation, and dissolution of partnerships in India, defining rights and obligations. Partnership Entity, i.e. Partnership Firm This option for doing a business is legally available to us in India. By the way, most people like to do business on a personal level in India, so we get to see the business in this type of proprietorship. For common people, job seems to be the safest and best option, which is what the first generation teaches its next generation.

Time has changed and no one has seen the store of information in the history of human society before this. Before this, if we wanted to get any information, we had to go to professional people by paying money or had to read a lot of books and had to spend a lot of time. Therefore, after this information became available, the attitude of the people changed and the perception that it takes a lot of money to do business changed.

Partnership organization was formed because of this, in which one person has the experience and another person has money, two such persons can come together and do business by forming a partnership firm. It is not that this law did not exist earlier, but today people have started seeing the benefits of doing business in partnership firm. So today we will try to know what is a partnership firm in reality and how it works.

Indian Partnership Act 1932  –

The Indian Contract Act, 1872, this main law contained provisions regarding partnership firms before the introduction of the Partnership Act, which in 1932 made the Partnership Act the need for a separate law. Any organization that is formed for the purpose of earning money and in which more than two people come together and do business, it is considered as a partnership firm.

This law was made in British India, which was kept even after the independence of India, the only changes were made in it from time to time. This best option for doing small scale business was made available by the government. Registering a partnership firm is not mandatory in most of the states, only in Maharashtra, registration is necessary for some important reasons.

In view of the situation in British India at that time, the Partnership Act was brought separately in India by the British Government, which was earlier a part of the Indian Contract Act. Partnership Act It is mainly a legal contract where more than two persons come together for the purpose of a business and start work.

What is a Partnership Firm?  –

Company law is considered to be the most ideal law for any law related to business in India, whose provisions and the provisions of any special law, if there is some discrepancy in it, then the rules of company law are considered ideal. The definition of company has been given in the Companies Act and the definition of partnership firm has been given in the Partnership Act.

A company registered in the Partnership Act is called a partnership firm, according to the Companies Act, the company which is registered in the Companies Act is considered to be a company that does business on a large scale. What is specifically in the company law in a partnership firm is not found in it and the partnership firm is run with unlimited responsibility.

All the provisions of the Contract Act are applicable for the partnership firm where a valid contract is made in which this agreement should be in the living persons, in this agreement a person below the age of 18 years is not eligible and mentally handicapped person is not eligible. . It is considered to be the best option for doing business on a small scale, where more than two people can come together to do business for one purpose, most of which should be 20.

History of Partnership Act –

As we have seen, the Indian Partnership Act was brought in India by the British Government, whose main basis was based on the Partnership Act of 1890 in Britain. In which some changes were made only by looking at the situation of India at that time and its main basis has been based on the recommendations of the Indian Contract Act and the Law Commission of 1866 which was headed by Lord Romil.

This law was approved on 8 April 1932 and on 1 October 1932 this law was directly implemented in India. In the Indian Contract Act, provisions were given for partnership firms up to section 239-266, which should make a separate law for the development of partnership been done.

This law, made in 1932, is applicable in India even today, some changes were made in it according to the time, but the main structure of the law has been kept the same. By 2022, a lot of ways of doing business have evolved, in which the most important way is the business created under the company law, it is considered important today and separately in 2008, this separate law was made Limited Liability Partnership.

Features of Partnership Firm –

  • Partnership firm This option is considered to be a better option than a business run by one person and we will see some of its features later.
  • In a partnership firm, more than two persons and a limited number of people up to 20 can start any legal business for the purpose of making profit.
  • This partnership firm has to be registered under the Partnership Act, which is voluntary.
  • This is an important agreement of a business, in which the rules and regulations for the business are made by making the agreement.
  • The partnership firm terminates on the death of one of the partners and the heirs of that deceased partner, if they so desire, can continue the partnership by entering into a new agreement.
  • If there is a loss in the partnership firm, then the partners have to take unlimited responsibility for it, which includes personal property.
  • Partners have to work for the purpose for which the partnership firm is established.
  • As per Section 7 of the Partnership Act, the partnership is terminated at will.
  • Some partnership firms are formed for a business project running for some time, which is terminated after the completion of that project, its provisions are written in the agreement.
  • People who have knowledge and some people have money, such people can start such business firm together.

Disadvantages of Partnership Firm –

  • Many people in India do not believe in doing business in partnership firm, so they prefer to do business in the proprietorship.
  • Sometimes the consequences of one partner’s wrong decision have to be suffered by the other partners.
  • For a partnership firm, the income tax provisions have to be paid at a higher tax rate than the proprietorship.
  • The Limited Liability Partnership Act 2008 was brought in view of the shortcomings of partnership, which has been made a better alternative to this law.
  • Two different thinking persons enter into a business contract for a purpose, in which it becomes a simple thing to create financial and mental problems in the future.
  • Sometimes one partner works hard to increase more business, then the other partner is less likely to see this problem.
  • Due to non-compulsory partnership agreement under this law, it becomes very difficult to get justice in the judicial process in case of future problems.
  • All the partners are responsible for all the dealings done for the partnership firm irrespective of the activity done by one of the representatives.
  • According to the law, the partnership firm is not considered a separate artificial person like a company, all its responsibilities are on all the partners.

Registration of Partnership –

Under the Partnership Act, a partnership firm has an agreement, but it is not mandatory to register it, so most partnership firms are not registered in India. In this, the registration of the agreement of the partnership firm and the registration to be done under the law of the partnership firm are important activities which are not mandatory.

Registration of a partnership firm is considered necessary in the British Partnership Act, but it is not considered mandatory in our law. Under section 69 of this law, what are the disadvantages of not registering a partnership, this provision has been given, but in reality it is seen that most partnership firms are not registered.

If seen in the context of Contract Act and Witness Act, Partnership Agreement is considered important as a whole if it is registered, but without registering it loses its importance legally. Small-scale businesses in India do not want to do their business on the basis of law and order, which is mainly due to corruption and delay in justice. Therefore, due to the development of law and order in foreign countries, it is considered necessary to register a partnership firm.

Importance of ADR Provision for Partnership –

In view of the weakness of India’s judiciary system, after 1990, many changes are seen in India under the new economic policy, in which Alternative Dispute Resolution 1996 which in English called Arbitration, Conciliation & madiation this law was brought in India whose main purpose is justice of India. Reducing the load on the system.

Under this law, only one provision has to be kept in the agreement of future problems in the partnership firm, in which it is written that in case of any future problem, a professional arbitrator will be appointed under the arbitration law, who will take whatever decision after seeing the reality. It will be approved by the partners, so that there will be no need for any partner to apply for justice in the main judicial system and justice will be done in work time and work cost.

Many partnership firms are run in India who are afraid to spend more on the lawyer, but some things are done for us in the initial time, for this, more money has to be spent in the future. Therefore, by making provisions for appointing ADR in the partnership agreement, you can give yourself judicial protection, in which professionals can be appointed in a heterogeneous form, in which lawyers, chartered accountants and other experts can be appointed.

Rights & Duties of Partners  –


  • In the event of the death of a partner, the benefits accruing to his heirs are the rights of his family.
  • The rest of the partners cannot be responsible for the illegal activities by the representative of the partnership firm.
  • Apart from the partnership firm, these partners can carry on their other business if no provision has been made in the partnership.
  • Any partner may opt out of the agreement in fulfillment of the purpose or desire of the partnership.
  • In the partnership, the right to take new partners, retirement, or death, such changes in partners is with a majority vote.
  • In the partnership firm, it will be the right of the partners to make changes in any business or to have their opinion on any important decision and decisions are taken by majority.


  • According to section 18, all the partners act personally as representatives of the firm, so that work must be related to the object of the firm.
  • As per section 19, any act done by the representative of the partnership firm shall be deemed to be the responsibility of all the representatives.
  • According to section 20, the rights of any of the partners of the partnership firm can be increased or reduced.
  • For partnership, profits are distributed as per the agreement, similarly in case of loss, every partner will have to accept it.
  • It is mandatory to give legal notice to the firm before leaving the partnership firm.

LLP & Partnership Firm  –

Limited Liability Partnership Act This Act 2008 i.e. LLP Act was passed by the Parliament, whose main objective was to remove the shortcomings in the Partnership Act for the partnership firm. LLP This firm has been given to the partnership firm by this law, the characteristics that the company gets in the Companies Act.

We get to see this modern type of partnership firm, in which the responsibility of the partners for future financial problems has been limited and secured. After the death of any of the partners, the partnership firm does not end, it continues to run until any financial problem does not arise.

Changes have been made in the company law keeping the core structure of the company and partnership firm the same and this law has been brought to promote the partnership. Those who first understand that registering under the Companies Act is a very complicated task, for them, setting up an LLP firm is considered a good option.


What are the advantages and disadvantages of such a partnership firm. People doing business in Proprietorship and Partnership Firm in this way 80% employment is provided in India. We get to see such a huge business area in India, so many schemes are run by the government to encourage them.

Here we have tried to know in common language about what provisions are given in this law for partnership firm. Partnership Firm Government of India LLP 2008 This law has been made, under which an attempt has been made to remove the flaws of the partnership firm and by law to provide protection to the partners.

Most of the people in India do not like to do business in traditional business partnerships which have been doing business for many generations. Their problem is never money to do business, but information for a new business. In today’s era, those who have money and who have knowledge, such people can start a partnership firm together.


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