What are the Rights and Duties of Partners in Partnership Firm?

An agreement is needed between the partners in order to establish a mutual relation between them. Due to this, partners get mutual rights and duties who are involved in a business. Under the Sections 9 to 17 of the Indian Partnership Act, there are provisions to monitor the mutual relations of each partner. These relations are monitored via contract that exists among them which can be expressed by dealing. The agreement varies from partner to partner according to their consents. In this blog, we will go through the various rights and duties of partners in a partnership firm.

Rights awarded to a Partner

The rights that are awarded to a partner when they enter a partnership firm are listed below:

Section 12(a): Right to take part in running of business

Every partner in the firm has the right to be a part of the business that will be run by the firm. In case the right to participate in the business of a partner is violated and he is excluded wrongfully, then the Court of Law can step in. The Court can issue an order against the order partners to stop the Violation.

Section 12(c): Right to be asked/consulted

Whenever there is a difference between the partners about the business of the firm, then the decision will be taken by keeping the majority in view.Every partner is awarded the right to present his opinion before any final decision is made. In most cases the decision of the majority partners will prevail.

Section 12(d): Right to access books

A partner of the firm either working or sleeping has a right to have access to all the books of a partnership firm. He gets the right to go through the books and have a copy of it. But, this right needs to be exercised bonafide.

Section 13(a): Right of a partner to remuneration

None of the partners are awarded the facility of remuneration on the profits along with their shares just because they are a part of the firm’s business. But this rule may vary by an express agreement or by dealings due to which the partner may be entitled for a remuneration. In such a case, the partner is free to claim his remuneration even if there is no contract. Simply put, it is mandatory to give a remuneration to a partner for running a firm business and the partner can easily claim it even if there is no drafted contract for its payments.

Section 13(b): Right to Profit Sharing

The profits earned by a business are to be equally distributed among the partners. In the same way, the losses incurred by the business of the firm are also contributed equally. If there is some sort of agreement between the partners, then the share will be decided on its behalf. However, if no agreement is there, then the share of profit is supposed to be equal and the person who claims that the shares are unequal will have to prove it himself.

Section 13(c): Right to interest on capital

If a partner opts for interest on capital, then it will be paid to the partner under the partnership deed and the interest will be paid out of the profits. Generally, this interest is not payable to the partner until there is an agreement of that effect. The main principle of this provision is that the partners are adventurers rather than creditors for a firm. To gain the interest on the capital, the partner must possess the following elements:

• An express agreement that states the same
• Any trade custom that validates that effect
• A statutory provision that will permit him to gain such type of interest on the capital.

Section 13(d): Right to Interest on Advance Payments

In case a partner makes some sort of advance to the firm in addition to the capital that has been invested by him, then the partner is eligible to claim an interest afterwards at the rate of 6% per annum. The interests on capital stop once the dissolution takes place, however the interests on advances stay intact till the date of payment. The advance made by a partner is seen as a loan and needs to bear interest.

Section 13(e): Right to Compensation

Every partner of the firm has the right to repay to get compensated for the payments he made and the liabilities that he incurred in the normal running of the firm business. This also includes any acts that are performed by him in an emergency in order to protect the business.

Section 31: Right to prevent the entry of a new partner

Every partner is awarded the right to prevent the admission of any new partner in the firm. Every existing partner must consent for the entry of a new partner.

Section 32(1): Right to Retire from business

All the partners have the right to retire from the business if all the other partners consent for it. But, if the partnership was formed at will, then the retirement of a partner can be done just by issuing a notice to all the other partners of the firm.

Section 33: Right not to be thrown out

All the partners of the business have the right to stay in business and carry it out. No partner can be expelled from the business by any majority unless it has been stated in a partnership agreement and the dismissal is done for the betterment of the firm.

Section 37: Right to subsequent profits of a outgoing partner

In case, a partner has died or is not a partner of the firm anymore but the business is carried out by the remaining partners, then he is awarded a right to share of profit. In case he has passed away, his share of profits can be used for the betterment of the firm.

Section 40: Right to firm Dissolution

Every partner has the right to dissolve the partnership of the firm if all the partners consent to it. But, if the partnership was formed at will, then the firm can be dissolved by any of the partners by issuing a notice to all the other partners in written form.

Duties of the partners of the firm

The following are some of the duties of a partner of a partnership firm that he must abide by:

Section 9: A Partner’s general duties

The partners are lawfully bound to take the business of the partnership firm forward. The general duties of a partner include the following:

• He should carry on the business to the highest point to common advantage
• He should be faithful to the firm
• A partner must open up to his legal representative about the problems that are affecting the firm

Section 10: To compensate for fraud

Under this section, the partner of the firm is accountable for compensating the firm for any sort of damages that are caused to the business of the firm due to the fraud done by a partner in running the firm.

Section 13(f): To compensate for willful neglect

Under this section, the partners of the firm need to compensate the firm for any of the damages caused by the willful neglect in the running of the business of the firm.

Section 12(b) and 13(a): To manage duties properly

Under Section 12(a), a partner is lawfully bound to carry out his duties properly as per the Indian Partnership Act. Section 13(a) states that a partner is not awarded a remuneration for taking part in the conduction of business.

Section 13(b): Sharing of Losses

All the partners need to contribute for the losses equally incurred by the firm.

Section 16(a): To report for profits

In case a partner derives any sort of profit from the firm for himself from any transaction that is under the firm or by the use of property or in the name of the firm, then the partner has a duty to refund it back to the firm.

Section 16(b): To report and pay for profits to compensate for business

If any partner runs a company that has the same type of business as the firm and tries to compete with the firm, then the partner will be responsible for and will have to pay to the firm the profits made by the partner in his business. The business will not be held accountable for any sort of losses that are caused in the business.