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

Neha, Omkar and Preeti run a firm in Nagpur. The firm's business is carried on by Neha alone, who acts on her own and for the others by their agreement. Omkar and Preeti never act in the business but share profits equally with Neha. A supplier sues all three for goods bought by Neha for the firm. Which is the best view?

All three are liable. A partnership business may be carried on by all or any of the partners acting for all, so Neha acted as agent of the firm. Dormant partners remain liable jointly and severally to outsiders, without limit, for the firm's debts.

  1. AOnly Neha is liable, as she alone acted
  2. BOmkar and Preeti are liable only up to their capital
  3. COmkar and Preeti are not liable because they took no part in business
  4. DAll three are liable, since the business is carried on by all or any of them acting for all, and Neha is their agentCorrect

Explanation

The definition requires a business carried on by all or any of them acting for all. Neha acts as agent for all, and each partner is liable jointly and severally for the firm's acts. Taking no active part does not remove liability, so C is wrong. Unlimited liability makes B wrong.

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