Introduction:
The pooling of resources of over one individual is required for industrial and commercial development, and this pooling of resources results in the creation of partnerships and partnership firms. This had to be regulated, so there was a necessity to make the partnership act. The partnership comes into existence as results of an agreement among the partners. Everyone wanted to draft the contract, to maximize their profit and the other partner had to suffer. This is one of the reasons for the existence of the partnership act. The Rights and duties had to have boundaries.
Partnership in UK:
In early 1997 the united kingdom Department of Trade and Industry (“DTI”) circulated a consultation paper and their investigation targeted particularly, however not exclusively, on the joint and several other liabilities of skilled defendants, seeking to determine whether or not there was the associate debatable case for substitution joint and several other liabilities by, for example, a system whereby every litigator might be responsible for solely a proportionate share of the loss. Though the remit failed to reach the question of joint and several other liabilities among partnerships, the DTI took the chance to consult on the specific however connected question whether or not to amend the law United Kingdom of Great Britain to allow partnerships.
The formation and governance of partnerships in the United Kingdom are regulated by UK partnership law. English, Scots, or Northern Irish law may apply depending on where the partnership was formed, in addition to UK-wide statutes. A partnership in Scotland is an autonomous legal entity that can borrow money from a bank on its own behalf, while in England; borrowing is only allowed on behalf of a partner. Partnerships are a type of company that naturally forms when people run a business for profit (“Partnership Act 1890”). Like partners, they are collectively and severally responsible for the land. Limited partnerships formed under the Partnership Act of 1907 are the same thing as partnerships under the Act of 1890, with the addition of two types of partners: Limited partners and General partners. The relationship is a limited partnership. As a shareholder, a General Partner is handled and responsible for the Company's debts and liabilities under the Partnership Act of 1890.
A limited partner, contrary to general partners, has limited responsibility, which means that they are not responsible for debts and obligations beyond their placement as they are not part of the group board. When a limited partner engages in the administration of the business, it would be treated as a general partner and held liable for the debts and obligations suffered by the company when it was responsible for this. A limited partnership must be included in the "Companies House" list to be considered as a limited partnership; otherwise, it will be viewed as a partnership.
The LLP established under Limited Liability Partnerships Law 2000 is a different legal body from the persons who own it (formally referred to as the 'owners' but sometimes referred to as the 'partner'). The LLP is a limited liability partnership. Limited liability agreement holders are not responsible for LLP's debts or obligations and are thus not liable for LLP debts. In order to be incorporated, a limited liability company must have two or more members. The 'Partnership Act of 1890' or the 'Limited Partnerships Act of 1907' shall not cover limited liability partnerships. There is, however, one significant exception in tax matters: LLPs for tax purposes are known as partnerships.
The partnership can be achieved by an oral arrangement, a written text, or by behaving in a certain way. The minimum membership has been two since 2002, and the maximum is unlimited. Each Partner has the right to engage in administration, to earn a reasonable share of earnings, to be indemnified from company liabilities, and to avoid expulsion by other partners.
In the case, “The Bankside Brewery” was a 300-person collaboration that started on June 21, 1808, and lasted for 99 years. Since Drury was one of three bosses, the alliance rules had a clause for managers to be voted out of the anniversary meeting. In the case of suspected fraud, a group of 12 partners that audited the accounts may call an extraordinary general meeting. The alliance will be broken after two successive votes from three-quarters of both partners, and the general meeting can be elected by further ratification.
Six of the committee partners claimed that the administrators were guilty of serious maladministration, and so appealed to the tribunal for a dissolution order with a receiver. The Court of Chancery, "Sir Samuel Romilly and Lord Eldon," ruled in 1812 that the court lacked the authority to intervene in the relationship. The processes for the aggrieved partners' Right to Redress started inside the partnership's rules in the first place.
In another case, it was decided that earning relationship profits made the receiver a partner. Later, "John George Phillimore" opined that this was "one of the most ludicrous conclusions ever made by a court of law."
In another case, the two iron merchants were carrying a business in partnership with the name Smith & Sons. Thanks to financial difficulties, they took a loan. But they couldn’t repay the debts. So, they executed a deed of arrangement in favor of creditors. Out of all the creditors five of them were appointed as trustees. Two of these trustees were Cox and Wheat croft. Under the deed, the trustees were empowered to enter into contracts and distribute internet income from the business among Smith and Son's general creditors. The plaintiff, Hickman supplies some goods to the firm that the trustees became indebted to him. He executed a bill of exchange; therefore, the trustees couldn’t repay it. So, the plaintiff sued the trustees for the recovery of the cash.It was held that the trustees aren't liable. Although they were sharing the profit of the business and acting as agents they weren't working because of the principals. So, there's no element of mutual agency. Lord Cranworth said: “A partner virtually embraces the character of both a principal and an agent.” therefore the trustees weren't the partners of the firm; they couldn’t be held liable.
Partnership in India:
The 'Indian Partnership Act' came into force on 1 October 1932 and was passed in 1932. The former partnership law contained in "Chapter XI of the Indian Contract Act, 1872" was replaced by the present law. There is nothing new in the Act. It seeks to explain and change the relationship statute. When partnerships are formed by an agreement, they will not only be bound by the rules of the "Partnership Act," but will also apply to the common law of the contract if there is no special arrangement in the Partnership Act.
“The Partnership Act” explicitly states, even to the degree that they contravene the express provisions of this act, the unrevoked provisions of the “Indian Contract Act of 1872” continue to apply. Consequently, a relationship arrangement is often governed by laws on bid and approval, consideration, free agreement, the legality of purpose, and other provisions of the “Indian Contract Act 1872”. On the one hand, the status of the minor is regulated by provisions of the "Partnership Act," since "Section 30 of the Indian Partnership Act" includes specific requirements.
The partnership is an advancement over the ‘Sole –trade business,' in which a single individual operates his or her own business using his or her own resources, skill, and effort. Because of the small resources that a sole trader has, it is impossible to consider a large company that requires more investment and resources than a single trader. On the other hand, a partnership will bring together several people to build a much larger company than any of the individual partners can afford. In case of a loss, the partners in a partnership share the burden.
The Law Committee of the Indian Partnership Act strongly recommends that the partnerships be registered by the said Act but have not yet been adopted. The "V. Subramanian v. Rajesh Raghuvandra Rao" case, rejected by a state amendment to the register of partnerships for being illegal, is a landmark case. The matter was referred to the Bombay City Civil Court, with the appellants requesting the dissolution of unrecorded relations between the appellants and the respondents. The defense was that under “Sub-section (2A) of Section 69 of the Indian Partnership Act of 1932”, the suit was not maintainable in the case in question. The “Bombay City Civil Court” held that the Maharashtra amendment to this Sub-Section of Act No. 29 of 1984, which is in breach of Articles 14 and 19(1)(g) of the Constitution of India, is unconstitutional. Following section 113 of the “Code of Civil Procedure,” the “City Civil Court” referred to the High Court. The High Court contested the decision and considered that the section was not in breach of India's Constitution. Also in India, when the question of whether the written and oral contract under the Partnership Act is binding or not.
The Supreme Court in a case ruled that any contract must be in writing and is not mandatory under the law. An equally binding agreement between the parties can be reached by oral agreement or when a statute requires a written agreement.
Some fundamental differences in LLP of the U.K. and India are as follows:
Conclusion:
The increase in undertakings of partnership firms required a statute to regulate the affairs of the same. It involves more than a partner; hence, the rule aids in ascertaining their rights and liabilities. Regulation differs in different lands. For example in English law loan has to be obtained in the name of the individual partners. But in India, it can be got in the name of the firm. The act in England was done in 2000 while in India it dates to 1932. Though they differ yet, have quite similarities in their fundamental spirit. Both limit the liability of the partners and make them liable only for their share of capital investment. With more similar matching points the primary aim of the smooth and proper conduct of business by partnership firms is ensured by statutes of either land.
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