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CA Foundation · Business Laws · The Indian Partnership Act, 1932

Arun, Bela and Chetan are partners in a firm. The deed is silent on the matter. Arun wants to expel Chetan because Chetan often reaches the office late. Arun and Bela together, being a majority, pass a resolution expelling Chetan. What is the legal position under the Indian Partnership Act, 1932?

The expulsion is invalid. A partner can be expelled only when the partnership contract gives that power, the majority exercises it, and it is done in good faith. Since the deed is silent, the majority has no right to expel Chetan merely by passing a resolution.

  1. AThe expulsion is valid because a majority of partners can always expel a partner
  2. BThe expulsion is invalid because a partner cannot be expelled by majority unless the power is given by contract between the partners and exercised in good faithCorrect
  3. CThe expulsion is valid if Chetan is given three months' notice
  4. DThe expulsion is valid only if approved by the court

Explanation

A partner can be expelled only if the power of expulsion is conferred by the contract between the partners, the power is exercised by a majority and it is used in good faith for the benefit of the firm. Here the deed is silent, so there is no such power and the majority resolution is invalid. Option A is wrong because majority power alone is not enough.

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