Savings.– Nothing in this Act or any repeal effected thereby shall affect or be
deemed to affect–
(a) any right, title, interest, obligation or liability already acquired, accrued
or incurred before the commencement of this Act, or
(b) any legal proceeding or remedy in respect of any such right, title,
interest, obligation or liability, or anything done or suffered before the
commencement of this Act, or
(c) anything done or suffered before the commencement of this Act, or
(d) any enactment relating to partnership not expressly repealed by this
Act, or
(e) any rule of insolvency relating to partnership, or
(f) any rule of law not inconsistent with this Act.
Short title, extent and commencement
Definitions
Application of Provisions of Act, IX of 1872
CHAPTER II
THE NATURE OF PARTNERSHIP
Definition of “Partnership”, “Partner” Firm and “firm name”
Partnership not created by status
Mode of determining existence of partnership
6A Act not to apply certain relationship
Partnership-at-will
Particular Partnership
CHAPTER III
RELATIONS OF PARTNERS TO ONE ANOTHER
General duties of Partners
Duty to indemnify for loss caused by Fraud
Determination of rights and duties of Partner by contract between the
Partners
The conduct of the business
Mutual rights and liabilities
The property of the firm
Application of the property of the firm
Personal profits earned by Partners
Rights and duties of Partners after a change in the firm, after the expiry
of the term of the firm, and where additional undertakings are carried out
CHAPTER IV
RELATIONS OF PARTNERS TO THIRD PARTIES
Partner to be agent of the firm
Implied authority of Partner as agent of the firm
Extension and restriction of Partner’s implied authority
Partner authority in an emergency
Mode of doing act to bind firm
Effect of admissions by a partner
Effect of notice to acting partner
Liability of a partner for acts of the firm
Liability of the firm for wrongful act of a partner
Liability of a firm for misapplication by partner
Holding out
Right of transferee of a partner’s interest
Minors admitted to the benefits of partnership
CHAPTER V
INCOMING AND OUTGOING PARTNERS
Introduction of a partner
Retirement of a partner
Expulsion of a partner
Insolvency of a partner
Liability of estate of deceased partner
Rights of outgoing partner to carry on competing business
Rights of outgoing partner in certain cases to share subsequent profits
Revocation of continue guarantee by change in firm
CHAPTER VI
DISSOLUTION OF A FIRM
Dissolution of a firm
Dissolution by agreement
Compulsory dissolution
Dissolution on the happening of certain contingencies
Dissolution by notice of partnership-at-will
Dissolution by the Court
Liability for acts of partners done after dissolution
Rights of partners to have business wound up after dissolution
Continuing authority of partners for purpose of winding up
Mode of settlement of accounts between partners
Payment of firm’s debts and of separate debts
Personal profits earned after dissolution
Return of premium on premature dissolution
Rights where partnership contract is rescinded for fraud or
misrepresentation
Rights to restrain from use of firm name or firm property
Agreements in restraint of trade
Sale of goodwill after dissolution
Rights of buyer and seller of goodwill
Agreement in restraint of trade
CHAPTER VII
REGISTRATION OF FIRMS
Power to exempt from application of this Chapter
Appointment of Registrars
Application for registration
Registration
Recording of alterations in firm name and principal place of business
Noting of closing and opening of branches
Noting of changes in names and addresses of partners
Recording of changes in and dissolution of a firm recording of
withdrawal of a minor
Rectification of mistakes
Amendment of Register by order of Court
Inspection of Register and filed documents
Grant of copies
Rules of evidence
Effect of non-registration
Penalty for furnishing false particulars
Power to make rules
CHAPTER VIII
SUPPLEMENTAL
Mode of giving public notice
Repeals
Savings
TEXT
THE PARTNERSHIP ACT, 1932
(IX of 1932)
[8th April 1932]
An
Act
to define and amend the law relating to partnership
Whereas it is expedient to define and amend the law relating to partnership;
It is hereby enacted as follows:–
CHAPTER I
PRELIMINARY
Short title, extent and commencement.– (1) This Act may be called the
Partnership Act, 1932.
[(2) It extends to the whole of Pakistan.]
(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.
Definitions.– 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 (IX of 1872) shall have the meanings assigned to them in that Act.
Application of provisions of Act IX of 1872.– The un repealed provisions of
the Contract Act, 1872, saves in so far as they are inconsistent with the express
provisions of this Acts, shall continue to apply to firms.
CHAPTER II
THE NATURE OF PARTNERSHIP
Definition 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”.
Partnership 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.
Mode 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.
Explanation 1.– 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.
Explanation 2.– 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 of payment–
(a) by a lender of money 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 of itself make the
receiver a partner with the persons carrying on the business.
6A. Act not apply to certain relationships.– Nothing contained in this act shall
apply to a relationship created by any agreement between Banking company and a
person or group of persons providing for sharing of profits and losses arising from or
relating to the provision by the Banking company of finance to such person or group
of persons.
Explanation.– for the purpose of this section, “Banking Company” and finance “shall
have the same meanings as in the Banking tribunals ordinance, 1981.
Partnership at will.– Where no provision is made by contract between the
partners for the duration of their partnership, or for the determination of their
partnership the partnership is “partnership at will”.
Particular partnership.– A person may become a partner with another
person in particular adventures or undertakings.
CHAPTER III
RELATIONS OF PARTNERS TO ONE ANOTHER
General duties of partners.– Partners are bound to carry on the business of
the firm to the greatest common advantage, to be 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.
Duty 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.
Determination 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 expressed 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.
(2) Agreements in restraint of trade.– 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.
The 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 and to inspect and copy any
of the books of the firm.
Mutual 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 per cent 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.
The 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, rights and interests in
property acquired with money belonging to the firm are deemed to have been
acquired for the firm.
Application 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.
Personal 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.
Rights and duties of partners after a change in the firm, after the expiry
of the term of the firm and where additional undertakings are carried out.–
Subject to contract between the partners–
(a) where a change occurs in the constitutions 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;
(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
(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 adventures or
undertakings are the same as those in respect of the original
adventures or undertakings.
CHAPTER IV
RELATIONS OF PARTNERS TO THIRD PARTIES
Partner to be agent of the firm.– Subject to the provisions of this Act a
partner is the agent of the firm for the purposes of the business of the firm.
Implied authority of partner as agent of the firm.– (1) Subject to the
provisions of section 22,³ the act of a partner which is done to carry on, in the usual
way, business of the kind carried on 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.
Extension 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.
Partner’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.
Mode 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.
Effect 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.
Effect of notice to acting partner.– Notice to a partner who habitually acts in
the business of the firm or 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.
Liability 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.
Liability 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 therefore to the same extent as the partner.
Liability 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.
Holding out.– (1) Any one 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 any one 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.
Rights 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.
Minors 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 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 that all the partners acting together or any partner 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 as a miner 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 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 subsection (4).
(9) Nothing in subsections (7) and (8) shall affect the provisions of section
28.
CHAPTER V
INCOMING AND OUTGOING PARTNERS
Introduction 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 became a partner.
Retirement 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 be 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 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 of 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 that a retired partner is not liable to any third party who deals with
the firm without knowing that he was a partner.
(4) Notices under subsections (3) may be given by the retired partner or by
any partner of the reconstituted firm.
Exclusion of a partner.– (1) A partner may not be expelled from a firm by
any majority of the partners, saves in the exercise in good faith of powers conferred
by contract between the partners.
(2) The provisions of subsections (2), (3) and (4) of section 32 shall apply
to an expelled partner as if he were a retired partner.
Insolvency 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.
Liability 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.
Rights 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 the
ceased to be a partner.
(2) Agreements in restraint of trade– 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.
Right 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 of 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 that where 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.
Revocation of continuing guarantee by change in firm.– A continuing
guarantee given to a firm, or to a third party in respect of the transaction 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.
CHAPTER VI
DISSOLUTION OF A FIRM
Dissolution of a firm.– The dissolution of partnership between all the
partners of a firm is called the “dissolution of the firm”.
Dissolution by agreement.– A firm may be dissolved with the consent of all
the partners or in accordance with a contract between the partners.
Compulsory 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.
Dissolution 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.
Dissolution 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.
Dissolution 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, willfully, 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.
Liability 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 that the estate of a partner who dies, or who if 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 subsection (1) may be given by any partner.
Right 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 according to their rights.
Continuing authority of partners for purposes of winding up.– After the
dissolution of a firm the authority of each partner to bind the firm, and the other
mutual rights and obligations of the partners, continue notwithstanding the
dissolution, so far as may be necessary to wind up the affairs of the firm and to
complete transactions begun unfinished at the time of the dissolution, but not
otherwise:
Provided that the firm is in no case bound by the acts of a partner who has
been adjudicated insolvent; but this proviso does not affect the liability of any person
who has after the adjudication represented himself or knowingly permitted himself to
be represented as a partner of the insolvent.
Mode of settlement of accounts between partners.– In settling the
accounts of a firm after dissolution, the following rules shall, subject to agreement by
the partners, be observed:–
(a) Losses, including deficiencies of capital, shall be paid first out of profits,
next out of capital, and, lastly, if necessary, by the partners individually
in the proportions in which they were entitled to share profits.
(b) The assets of the firm, including any sums contributed by the partners
to make up deficiencies of capital, shall be applied in the following
manner and order–
(i) in paying the debts of the firm to third parties;
(ii) in paying to each partner ratably what is due to him from the firm
for advances as distinguished from capital;
(iii) in paying to each partner ratably what is due to him on account
of capital; and
(iv) the residue, if any, shall be divided among the partners in the
proportions in which they were entitled to share profits.
Payment of firm’s debts and of separate debts.– Where there are joint
debts due from the firm, and also separate debts due from any partner, the property
of the firm shall be applied in the first instance in payment of the debts of the firm,
and, if there is any surplus, then the share of each partner shall be applied in
payment of his separate debts or paid to him. The separate property of any partner
shall be applied first in the payment of his separate debts, and the surplus (if any) in
the payment of the debts of the firm.
Personal profits earned after dissolution.– Subject to contract between the
partners the provisions of clause (a) of section 16³ shall apply to transactions by any
surviving partner or by the representatives of a deceased partner, undertaken after
the firm is dissolved on account of the death of a partner and before its affairs have
been completely wound up:
Provided that where any partner or his representative has brought the
goodwill of the firm, nothing in this section shall affect his right to use the firm name.
Return of premium on premature dissolution.– Where a partner has paid a
premium on entering into partnership for a fixed term, and the firm is dissolved
before the expiration of that term otherwise than by the death of a partner, he shall
be entitled to repayment of the premium or of such part thereof as may be
reasonable, regard being had to the terms upon which he became a partner and to
the length of time during which he was a partner, unless–
(a) the dissolution is mainly due to his own mis-conduct, or
(b) the dissolution is in pursuance of an agreement containing no provision
for the return of the premium or any part of it.
Rights where partnership contract is rescinded for fraud or
misrepresentation.– Where a contract creating partnership is rescinded on the
ground of the fraud or misrepresentation of any of the parties thereto, the party
entitled to rescind is, without prejudice to any other right, entitled–
(a) to a lien on, or a right of retention of, the surplus or the assets of the
firm remaining after the debts of the firm have been paid, for any sum
paid by him for the purchase of a share in the firm and for any capital
contributed by him;
(b) to rank as a creditor of the firm in respect of any payment made by him
towards the debts of the firm; and
(c) to be indemnified by the partner or partners guilty of the fraud or
misrepresentation against all the debts of the firm.
Right to restrain from use of firm name or firm property.– After a firm is
dissolved, every partner or his representative may, in the absence of a contract
between the partners to the contrary, restrain any other partner or his representative
from carrying on a similar business in the firm name or from using any of the
property of the firm for his own benefit, until the affairs of the firm have been
completely wound up:
Provided that where any partner or his representative has brought the
goodwill of the firm, nothing in this section shall affect his right to use the firm name.
Agreements in restraint of trade.– Partners may, upon or in anticipation of
the dissolution of the firm, make an agreement that some or all of them will not carry
on a 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.
Sale of goodwill after dissolution.– (1) in settling the accounts of a firm after
dissolution, the goodwill shall, subject to contract between the partners, be included
in the assets, and it may be sold either separately or along with other property of the
firm.
(2) Rights of buyer and seller of goodwill.– Where the goodwill of a firm
is sold after dissolution, a partner may carry on a business competing with that of the
buyer and he may advertise such business, but, subject to agreement between him
and the buyer 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 its
dissolution.
(3) Agreements in restraint of trade.– Any partner may, upon the sale of
the goodwill of a firm make an agreement with the buyer that such partner 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.
CHAPTER VII
REGISTRATION OF FIRMS
Power to exempt from application of this Chapter.– The [Provincial
Government of any Province may, by notification in the [official Gazette], direct that
the provisions of this Chapter shall not apply to [that Province] or to any part thereof
specified in the notification.
Appointment of Registrars.– (1) The [Provincial Government] may appoint
Registrars of Firms for the purposes of this Act, and may define the areas within
which they shall exercise their powers and perform their duties.
(2) Every Registrar shall be deemed to be a public servant within the
meaning of section 21 of the Pakistan Penal code.
Application for Registration.– (1) The registration of a firm may be effected
at any time by sending by post or delivering to the Registrar of area in which any
place of business of the firm is situated or proposed to be situated, a statement in
the prescribed form and accompanied by the prescribed fee, stating–
(a) the firm name,
(b) the place or principal place of business of the firm,
(c) the names of any other places where the firm carries on business,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and,
(f) duration of the firm.
The statement shall be signed by all the partners, or by their agents specially
authorized in this behalf.
(2) Each person signing the statement shall also verify it in the manner
prescribed.
(3) A firm name shall not contain any of the following words, namely:–
Government “Jinnah”, “Quaid-e-Azam”, or words expressing or implying the
sanction, approval or patronage of the “Federal” Government or any Provincial
Government or of the “Quaid-e-Azam”, except when the Provincial Government
signifies its consent to the use of such words as part of the firm name by order in
writing.
(3A) A firm name shall not contain the name of the “United Nations” or its
abbreviations through the use of its initial letters or of any subsidiary body set up by
that body unless it has obtained the previous authorization of the Secretary General
of the United Nations in writing.
(3B) A firm name shall not contain the name of the “World Health
Organization” or its abbreviations through the use of its initial letters unless it has
obtained the previous authorization of the Director-General in writing.
(3C) A firm name shall not contain any word which may be declared by the
Provincial Government, by notification in the official Gazette to be undesirable:
Provided that a firm which has as part of its name any word declared by the
Provincial Government to be undesirable shall, within one month of such declaration,
alter its name and send a statement to this effect to the Registrar.
Registration.– when the Registrar is satisfied that the provisions of section
58 have been duly complied with, he shall record an entry of the statement in a
register called Register of Firms and shall file the statement.
Recording of alterations in firm name and principal place of business.–
(1) When an alteration is made in the firm name or in the location of the principal
place of business of registered firm a statement may be sent to the Registrar
accompanied by the prescribed fee, specifying the alteration and signed and verified
in the manner required under section 58.
(2) When the Registrar is satisfied that the provisions of subsection (1)
have been duly complied with he shall amend the entry relating to the firm in the
Register of Firms in accordance with the statement, and shall file it along with the
statement relating to the firm filed under section 59.
Noting of closing and opening of branches.– When a registered firm
discontinues business at any place or begins to carry on business at any place, such
place not being its principal place of business, any partner or agent of the firm may
send intimation thereof to the Registrar, who shall make a note of such intimation in
the entry relating to the firm in the Register of Firms, and shall file the intimation
along with the statement relating to the firm filed under section 59.
Noting of change in names and addresses of partners.– When any
partner in a registered firm alters his name or permanent address, an intimation of
the alteration may be sent by any partner or agent of the firm to the Registrar, who
shall deal with it in the manner provided in section 61.
Recording of changes in and dissolution of a firm.– (1) When a change
occurs in the constitution of a registered firm any incoming, continuing or outgoing
partner, and when a registered firm is dissolved any person who was a partner
immediately before the dissolution, or the agent of any such partner or person
specially authorized in this behalf, may give notice to the Registrar of such change or
dissolution, specifying the date thereof; and the Registrar shall, make a record of the
notice in the entry relating to the firm in the Register of Firms, and shall file the notice
along with the statement relating to the firm filed under section 59.
(2) Recording of withdrawal of a minor.– When a minor who has been
admitted to the benefits of partnership in a firm attains majority and elects to become
or not to become a partner, and the firm is then a registered firm, he, or his agent
specially authorized in this behalf, may give notice to the Registrar that he has or has
not become a partner, and the Registrar shall deal with the notice in the manner
provided in subsection (1).
Rectification of mistake.– (1) The Registrar shall have power at all times to
rectify any mistake in order to bring the entry in the Register of Firms relating to any
firm into conformity with the documents relating to that firm filed under this chapter.
(2) On application made by all the parties who have signed any document
relating to the firm filed under this chapter, the Registrar may rectify any mistake in
such document or in the record or note thereof made in the Register of Firms.
Amendment of Register by order of Court.– A court deciding any matter
relating to a registered firm may direct that the Registrar shall make any amendment
in the entry in the Register of Firms relating to such firm which is consequential upon
its decision, and the Registrar shall amend the entry accordingly.
Inspection of Register and filed documents.– (1) The Register of Firms
shall be open to inspection by any person on payment of such fee as may be
prescribed.
(2) All statements, notices and intimations filed under this Chapter shall be
open to inspection, subject to such conditions and on payment of such fee as may
be prescribed.
Grant of copies.– The Registrar shall on application furnish to any person on
payment of such fee as may be prescribed, a copy, certified under his hand, of any
entry or portion thereof in the Register of Firms.
Rules of evidence.– (1) Any statement, intimation or notice recorded or
noted in the Register of Firms shall, as against any person by whom or on whose
behalf such statement, intimation or notice was signed, be conclusive proof of any
fact therein stated.
(2) A certified copy of an entry relating to a firm in the Register of Firms
may be produced in proof of the fact of the registration of such firm, and of the
contents of any statement, intimation or notice recorded or noted therein.
Effect of non-registration.– (1) No suit to enforce a right arising from a
contract or conferred by this Act shall be instituted in any Court by or on behalf of
any person suing as a partner in a firm against the firm or any person alleged to be
or to have been a partner in the firm unless the firm is registered and the person
suing is or has been shown in the Register of Firms as a partner in the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in
any Court by or on behalf of a firm against any third party unless the firm is
registered and the persons suing are or have been shown in the Register of Firms as
partners in the firm.
(3) The provisions of subsections (1) and (2) shall apply also to a claim of
set-off or other proceeding to enforce a right arising from a contract, but shall not
affect–
(a) the enforcement of any right to use for the dissolution of a firm or for
accounts of a dissolved firm, or any right or power to realise the
property of a dissolved firm, or
(b) the powers of an official assignee, receiver or court under the
1[Insolvency (Karachi Division 2 * Act,] or the Provincial Insolvency Act, 1920 to realize the property of an insolvent partner. (4) This section shall not apply– (a) to firms or to partners in firms which have no place of business in [Pakistan] or whose places for business in [Pakistan] are situated in areas to which by notification under [section 56] this Chapter does not apply or (b) to any suit or claim of set-off not exceeding one hundred rupees in value which, ³** is not of a kind specified in the Second Schedule to
the Provincial Small Cause Courts Act, 1887 or to any proceeding in
execution or other proceeding incidental to or arising from any such
suit or claim.
Penalty for furnishing false particulars.– Any person who signs any
statement, amending statement, notice or intimation under this Chapter containing
any particular which he knows to be false or does not believe to be true, or
containing particulars which he knows to be incomplete or does not believe to be
complete, shall be punishable with imprisonment which may extend to three months,
or with fine, or with both.
Power to make rules.– (1) [Provincial Government] may make rules
prescribing the fees which shall accompany documents sent to the Registrar of
Firms, or which shall be payable for the inspection of documents in the custody of
the Registrar of Firms, or which shall be payable for the inspection of documents in
the custody of the Registrar of Firms or for copies from the Register of Firms:
Provided that such fees shall not exceed the maximum fees specified in
Schedule.
Provided further that the fees payable for any service desired on the same
way on which an application for the same is made may be double the aforesaid
maximum fees.
(2) The [Provincial Government] may [also] make rules–
(a) prescribing the form of statement submitted under section 58, and of
the verification thereof;
(b) requiring statements, intimations and notices under sections 60,61,62
and 63 to be in prescribed form, and prescribing the form, thereof;
(c) prescribing the form of the Register of Firms and the mode in which
entries relating to firms are to be made therein, and the mode in which
such entries are to be amended or notes made therein;
(d) regulating the procedure of the Registrar when disputes arise;
(e) regulating the filing of documents received by the Registrar;
(f) prescribing conditions for the inspection of original documents;
(g) regulating the grant of copies;
(h) regulating the elimination of registers and documents;
(i) providing for the maintenance and form of an index to the Register of
Firms; and
(j) generally, to carry out the purposes of this Chapter.
(3) All rules made under this section shall be subject to the condition of
previous publication.
CHAPTER VIII
SUPPLEMENTAL
Mode of giving public notice.– A public notice under this Act is given–
(a) where it relates to the retirement or expulsion of a partner from a
registered firm, or to the dissolution of a registered firm, or to the
election to become or not to become a partner in a registered firm by a
person attaining majority who was admitted as a minor to the benefits
of partnership, by notice to the Registrar of Firms under section 63, and
by publication in the local [official Gazette] and in at least one
vernacular newspaper circulating in the district where the firm to which
it relates has its place or principal place of business, and
(b) in any other case, by publication in the local [official Gazette] and in at
least one vernacular newspaper circulating in the district where the firm
to which it relates has its place or principal place of business.