What is a partnership according to Indian Partnership Act 1932?

Partnership is an association between two or more persons. Let us now discuss about the legal aspects of partner­ship.

The Rules and regulations relating to partnership are governed by the Indian Partnership Act 1932. This act contains 74 sections and it came into force on Ist December 1932 except Section 69 (relating to the effect of non – registration of the firms ) which came into force on Ist October 1933. It extends to whole of India except to the state of Jammu and Kashmir

Definition

Section 4 Indian Partnership Act 1932 defines ‘Partnership’ in the following terms: -

“Partnership is the relation between persons who have agreed to share the profit of business carried on by all or any of them acting for all.”

Breaking the above definition, following essential elements of partnership are revealed:-

1. There must be an agreement.

2. Between two or more persons

3. Who agree to carry on business

4. With the object of sharing profit

5. The business must be carried by all or any of them acting for all or Mutual Agency.

All the above elements must coexist in order to constitute partnership. A brief explanation of these elements is as follows: 1. An agreement :- The relationship of partnership arises from an agreement between the persons concerned not from status. Agreement as made between the persons must be valid and enforceable by law. This agreement may be oral or written. To avoid future complications and dispute amongst the persons constituting partnership, agreement in writing must be preferred.

Example

A & B enters into a contract to carry on business of manufactur­ing of tin plates; a partnership is exacted between A&B.