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Kiran and Lata are partners in a firm trading in garments with no contract clause on outside business. Without telling Lata, Kiran starts a separate shop of the same nature, competing with the firm, and earns Rs 2,40,000 profit. What is the legal result?

Kiran must account for and pay the whole Rs 2,40,000 to the firm. Subject to contract, a partner who carries on a competing business of the same nature as the firm's must pay all profits from it to the firm, whether or not the firm suffered loss.

  1. AKiran keeps the profit because the business is his own
  2. BKiran must account for and pay the Rs 2,40,000 to the firmCorrect
  3. CKiran must pay half the profit to Lata personally and keep the rest
  4. DKiran must pay only if the firm suffered a loss

Explanation

Subject to contract between partners, a partner carrying on a business of the same nature as and competing with the firm must account for and pay to the firm all profits made in that business. The payment is to the firm, not to Lata personally, and is not tied to any loss of the firm.

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