1932

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Partnership Act, 1932

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The Partnership Act, 1932 codifies the law of partnership in Bangladesh. It applies to all partnerships formed within the territory, defined as 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. The Act does not apply to companies formed under the Companies Act. Key mechanisms include the nature of partnership, the relations of partners to third parties including the implied authority of a partner to bind the firm and the liability of partners for acts of the firm; relations of partners inter se, including the right to share profits, the duty to indemnify for loss caused by fraud, and the right to retire; and the dissolution of a firm covering dissolution by agreement, by court order, by insolvency, or by notice. A notable provision is Section 69, which bars suits on unregistered partnership debts. The Act remains in force and is the foundational partnership legislation.

Full text · showing key sections

§ 1Short title, extent and commencement

(1)This Act may be called the
Partnership Act, 1932
.

(2)It extends to the whole of Bangladesh.

(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.

§ 2Definitions

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
Contract Act, 1872
, shall have the meanings assigned to them in that Act.

§ 3Application of provisions of Act IX of 1872

The unrepealed provisions of the
Contract Act, 1872
, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to firms.

§ 4Definition of "partnership", "partner", "firm" and "firm name"

"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".

§ 5Partnership not created by status

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.

§ 6Mode of determining existence of partnership

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.

Explanation1.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.

Explanation2.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 none 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 or itself make the receiver a partner with the persons carrying on the business.

§ 7Partnership at will

Where no provision is made by contact between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is "partnership at will".

§ 8Particular partnership

A person may become a partner with another person in particular adventures or undertakings.

§ 9General duties of partners

Partners are bound to carry on the business of the firm to the greatest common advantage, to the just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner or his legal representative.

§ 10Duty to indemnify for loss caused by fraud

Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.

§ 11Determination of rights and duties of partners by contract between the partners

(1)Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be express or may be implied by a course of dealing.
Such contract may be varied by consent of all the partners, and such consent may be express or may be implied by a course of dealing.

§ 12aAgreements in restraint of trade

(2)Notwithstanding anything contained in section 27 of the
Contract Act, 1872
, such contracts may provide that a partner shall not carry on any business other than that of the firm while he is a partner.

§ 12The conduct of the business

Subject to contract between the partners-
(a) every partner has a right to take part in the conduct of the business;
(b) every partner is bound to attend diligently to his duties in the conduct of the business;
(c) any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners, and every partner shall have the right to express his opinion before the matter is decided, but no change may be made in the nature of the business without the consent of all the partners; and
(d) every partner has a right to have access to and to inspect and copy any of the books of the firm.

§ 13Mutual rights and liabilities

Subject to contract between the partners-
(a) a partner is not entitled to receive remuneration for taking part in the conduct of the business;
(b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm;
(c) where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits;
(d) a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six percent, per annum;
(e) the firm shall indemnify a partner in respect of payments made and liabilities incurred by him-
(i) in the ordinary and proper conduct of the business, and
(ii) in doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances; and
(f) a partner shall indemnify the firm for any loss caused to it by his wilful neglect in the conduct of the business of the firm.

§ 14The property of the firm

Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.
Unless the contrary intention appears, property and rights and interests in property acquired with money belonging to the firm are deemed to have been acquired for the firm.

§ 15Application of the property of the firm

Subject to contract between the partners, the property of the firm shall be held and used by the partners exclusively for the purposes of the business.

§ 16Personal profits earned by partners

Subject to contract between the partners,-
(a) if a partner derives any profit for himself from any transaction of the firm, or from the use of the property or business connection of the firm or the firm name, he shall account for that profit and pay it to the firm;
(b) if a partner carries on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all profits made by him in that business.

§ 17Rights and duties of partners after a change in the firm,

Subject to contract between the partners,-
(a) where a change occurs in the constitution of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change, as far as may be;

§ 18aafter the expiry of the term of the firm, and

(b) where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, so far as they may be consistent with the incidents of partnership at will; and

§ 20awhere additional undertakings are carried out

(c) where a firm constituted to carry out one or more adventures or undertakings carries out other adventures or undertakings, the mutual rights and duties of the partners in respect of the other adventure or undertakings are the same as those in respect of the original adventures or undertakings.

§ 18Partner to be agent of the firm

Subject to the provision of this Act, a partner is the agent of the firm for the purposes of the business of the firm.

§ 19Implied authority of partner as agent of the firm

(1)Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried by the firm, binds the firm.
The authority of a partner to bind the firm conferred by this section is called his "implied authority".

(2)In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to-
(a) submit a dispute relating to the business of the firm to arbitration,
(b) open a banking account on behalf of the firm in his own name,
(c) compromise or relinquish any claim or portion of a claim by the firm,
(d) withdraw a suit or proceeding filed on behalf of the firm,
(e) admit any liability in a suit or proceeding against the firm,
(f) acquire immovable property on behalf of the firm,
(g) transfer immovable property belonging to the firm, or
(h) enter into partnership on behalf of the firm.

§ 20Extension and restriction of partner's implied authority

The partners in a firm may, by contract between the partners, extend or restrict the implied authority of any partner.
Notwithstanding any such restriction, any act done by a partner on behalf of the firm which falls within his implied authority binds the firm, unless the person with whom he is dealing knows of the restriction or does not know or believe that partner to be a partner.

§ 21Partner's authority in an emergency

A partner has authority, in an emergency, to do all such acts for the purpose of protecting the firm from loss as would be done by a person of ordinary prudence, in his own case, acting under similar circumstances, and such acts bind the firm.

§ 22Mode of doing act to bind firm

In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the firm.

§ 23Effect of admissions by a partner

An admission or representation made by a partner concerning the affairs of the firm is evidence against the firm, if it is made in the ordinary course of business.

§ 24Effect of notice to acting partner

Notice to a partner who habitually acts in the business of the firm of any matter relating to the affairs of the firm operates as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of that partner.

§ 25Liability of a partner for acts of the firm

Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.

§ 26Liability of the firm for wrongful acts of a partner

Where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefor to the same extent as the partner.

§ 27Liability of firm for misapplication by partners

Where-
(a) a partner acting within his apparent authority receives money or property from a third party and misapplies it, or
(b) a firm in the course of its business receives money or property from a third party, and the money or property is misapplied by any of the partners while it is in the custody of the firm,
the firm is liable to make good the loss.

§ 28Holding out

(1)Anyone who by words spoken or written or by conduct represents himself, or knowingly permits himself to be represented, to be a partner in a firm, is liable as a partner in that firm to anyone who has on the faith of any such representation given credit to the firm, whether the person representing himself or represented to be a partner does or does not know that the representation has reached the person so giving credit.

(2)Where after a partner's death the business is continued in the old firm name, the continued use of that name or of the deceased partner's name as a part thereof shall not of itself make his legal representative or his estate liable for any act of the firm done after his death.

§ 29Rights of transferee of a partner's interest

(1)A transfer by a partner of his interest in the firm either absolute or by mortgage, or by the creation by him of a charge on such interest, does not entitle the transferee, during the continuance of the firm, to interfere in the conduct of the business, or to require accounts, or to inspect the books of the firm, but entitles the transferee only to receive the share of profits of the transferring partner, and the transferee shall accept the account of profits agreed to by the partners.

(2)If the firm is dissolved or if the transferring partner ceases to be a partner, the transferee is entitled as against the remaining partners to receive the share of the assets of the firm to which the transferring partner is entitled, and, for the purpose of ascertaining that share, to an account as from the date of the dissolution.

§ 30Minors admitted to the benefits of partnership

(1)A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership.

(2)Such minor has a right to such share of the property and of the profits of the firm as may be agreed upon, and he may have access to and inspect and copy any of the accounts of the firm.

(3)Such minor's share is liable for the acts of the firm, but the minor is not personally liable for any such act.

(4)Such minor may not sue the partners for an account or payment of his share of the property or profits of the firm, save when severing his connection with the firm, and in such case the amount of his share shall be determined by a valuation made as far as possible in accordance with the rules contained in section 48:

Provided thatall the partners acting together or any partners entitled to dissolve the firm upon notice to other partners may elect in such suit to dissolve the firm, and thereupon the Court shall proceed with the suit as one for dissolution and for settling accounts between the partners, and the amount of the share of the minor shall be determined along with the shares of the partners.

(5)At any time within six months of his attaining majority, or of his obtaining knowledge that he had been admitted to the benefits of partnership, whichever date is later, such person may give public notice that he has elected to become or that he has elected not to become a partner in the firm, and such notice shall determine his position as regards the firm:

Provided that, if he fails to give such notice, he shall become a partner in the firm on the expiry of the said six months.

(6)Where any person has been admitted as a minor to the benefits of partnership in a firm, the burden of proving the fact that such person had no knowledge of such admission until a particular date after the expiry of six months of his attaining majority shall lie on the persons asserting that fact.

(7)Where such person becomes a partner,-
(a) his rights and liabilities as a minor continue up to the date on which he becomes a partner, but he also becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership, and
(b) his share in the property and profits of the firm shall be the share to which he was entitled as a minor.

(8)Where such person elects not to become a partner,-
(a) his rights and liabilities shall continue to be those of a minor under this section up to the date on which he gives public notice,
(b) his share shall not be liable for any acts of the firm done after the date of the notice, and
(c) he shall be entitled to sue the partners for his share of the property and profits in accordance with sub-section (4).

(9)Nothing in sub-sections (7) and (8) shall affect the provisions of section 28.

§ 31Introduction of a partner

(1)Subject to contract between the partners and to the provisions of section 30, no person shall be introduced as a partner into a firm without the consent of all the existing partners.

(2)Subject to the provisions of section 30, a person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he become a partner.

§ 32Retirement of a partner

(1)A partner may retire-
(a) with the consent of all the other partners,
(b) in accordance with an express agreement by the partners, or
(c) where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.

(2)A retiring partner may de discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such third party and the reconstituted firm after he had knowledge of the retirement.

(3)Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement:

Provided thata retired partner is not liable to any third party who deals with the firm without knowing that he was a partner.

(4)Notice under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm.

§ 33Expulsion of a partner

(1)A partner may not be expelled from a firm by any majority of the partners, save in the exercise in good faith of powers conferred by contract between the partners.

(2)The provisions of sub-sections (2), (3) and (4) of section 32 shall apply to an expelled as if he were retired partner.

§ 34Insolvency of a partner

(1)Where a partner in a firm is adjudicated an insolvent he ceases to be a partner on the date on which the order of adjudication is made, whether or not the firm is thereby dissolved.

(2)Where under a contract between the partners the firm is not dissolved by the adjudication of a partner as an insolvent, the estate of a partner so adjudicated is not liable for any act of the firm and the firm is not liable for any act of the insolvent, done after the date on which the order of adjudication is made.

§ 35Liability of estate of deceased partner

Where under a contract between the partners the firm is not dissolved by the death of a partner, the estate of a deceased partner is not liable for any act of the firm done after his death.

§ 36Rights of outgoing partner to carry on competing business

(1)An outgoing partner may carry on a business competing with that of the firm and he may advertise such business, but, subject to contract to the contrary, he may not-
(a) use the firm name,
(b) represent himself as carrying on the business of the firm, or
(c) solicit the custom of persons who were dealing with the firm before he ceased to be a partner.

§ 37aAgreements in restraint of trade

(2)A partner may make an agreement with his partners that on ceasing to be a partner he will not carry on any business similar to that of the firm within a specified period or within specified local limits; and, notwithstanding anything contained in section 27 of the
Contract Act, 1872
, such agreement shall be valid if the restrictions imposed are reasonable.

§ 37Right of outgoing partner in certain cases to share subsequent profits

Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the outgoing partner or his estate, then, in the absence of a contract to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm or to interest at the rate of six per cent. per annum on the amount of his share in the property of the firm:

Provided thatwhere by contract between the partners an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner or the outgoing partner or his estate as the case may be, is not entitled to any further or other share of profits; but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section.

§ 38Revocation of continuing guarantee by change in firm

A continuing guarantee given to a firm, or to a third party in respect of the transactions of a firm, is, in the absence of agreement to the contrary, revoked as to future transactions from the date of any change in the constitution of the firm.

§ 39Dissolution of a firm

The dissolution of partnership between all the partners of a firm is called the "dissolution of the firm".

§ 40Dissolution by agreement

A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners

§ 41Compulsory dissolution

A firm is dissolved-
(a) by the adjudication of all the partners or of all the partners but one as insolvent, or
(b) by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership:

Provided that, where more than one separate adventure or undertaking is carried on by the firm, the illegality of one or more shall not of itself cause the dissolution of the firm in respect of its lawful adventures and undertakings.

§ 42Dissolution on the happening of certain contingencies

Subject to contract between the partners a firm is dissolved-
(a) if constituted for a fixed term, by the expiry of that term;
(b) if constituted to carry out one or more adventures or undertakings, by the completion thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent.

§ 43Dissolution by notice of partnership at will

(1)Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.

(2)The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.

§ 44Dissolution by the Court

At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely:-
(a) that a partner has become of unsound mind, in which case the suit may be brought as well by the next friend of the partner who has become of unsound mind as by any other partner;
(b) that a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner;
(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business, regard being had to the nature of the business;
(d) that a partner, other than the partner suing, wilfully or persistently commits breach of agreements relating to the management of the affairs of the firm or the conduct of its business, or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;
(e) that a partner, other than the partner suing, has in any way transferred the whole of his interest in the firm to a third party, or has allowed his share to be charged under the provisions of rule 49 of Order XXI of the First Schedule to the
Code of Civil Procedure, 1908
, or has allowed it to be sold in the recovery of arrears of land-revenue or of any dues recoverable as arrears of land-revenue due by the partner;
(f) that the business of the firm cannot be carried on save at a loss; or
(g) on any other ground which renders it just and equitable that the firm should be dissolved.

§ 45Liability for acts of partners done after dissolution

(1)Notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm if done before the dissolution, until public notice is given of the dissolution:

Provided thatthe estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable under this section for acts done after the date on which he ceases to be a partner.

(2)Notices under sub-section (1) may be given by any partner.

§ 46Right of partners to have business wound up after dissolution

On the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives