Skip to content

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

Ishaan, Jyoti and Kamal are partners in a firm. The deed empowers the majority to expel any partner. Ishaan and Jyoti pass a resolution expelling Kamal because they dislike his political views, and there is no harm to the firm's business. They act openly and give him notice. What is the legal position?

The expulsion is void. Even though the deed gives the majority a power to expel, that power must be used in good faith for the firm's benefit. Expelling a partner over personal dislike, with no harm to the business, fails the good faith requirement.

  1. AThe expulsion is valid because a majority passed it
  2. BThe expulsion is valid only if Kamal agrees within 7 days
  3. CThe expulsion is void because the power must be exercised in good faith for the benefit of the firmCorrect
  4. DThe expulsion is valid only if approved by a court

Explanation

A partner can be expelled only if the power is given by the contract, it is exercised by a majority of the partners, and it is exercised in good faith. Here the motive is personal dislike, not the interest of the firm, so good faith is absent and the expulsion is invalid. Having a majority alone does not cure this defect.

Did you get it right without looking?

One question tells you little. A timed set on The Indian Partnership Act, 1932 shows your real accuracy, how long you take and where you lose marks.

Practise The Indian Partnership Act, 1932Free diagnostic mock

More The Indian Partnership Act, 1932 questions