TUTORIAL 01 - SOCIAL AND LEGAL ISSUES [PROPRIETORSHIP, PARTNERSHIP AND COMPANY ACT]

Comment and answer the following questions, considering the Indian partnership Act 1932, Indian companies Act 1956.

Q1. Two brothers X (age 18 years), Y (age 17 years), decide to form a partnership. Can they do so?

Q2. Three brothers X (age 19 years), Y (age 18 years) and Z (age 17 years) decide to form a partnership with a provision that Z will share the profits only. Comment

Q3. Ten major persons form an association to which each member contributes Rs 10,000. The purpose is to produce medicines for free distribution to poor patients. Is there a valid partnership?

Q4. Two manufacturing firms, each having twenty members, amalgamate their business. Can contracts entered into by the amalgamated firm be enforced by the firm?

Q5. Two banking firms, each having ten members, amalgamate their business. Can contracts entered into by the amalgamated firm be enforced by the firm?

Q6. X and Y agreed to share the profits of a business carried on by all or any of them acting for all. Later on Z, Rs 1,00,000 to the firm on the condition that he will take 25% share in profits. Can Z regarded as a partner?

Q7. X, a contractor, appointed Y one of his servants to manage his business of loading and unloading railway wagons. Y was to receive 50% of the profits of the business and also to bear the losses, if any. Is Y a partner of X?

Q8. X and y jointly own a house, let it out on rent or Rs 10,000 p.a., and share the rental income equally. Can X and Y be regarded as partners?

Q9. X and y jointly own a house, converted that house into a hotel after investing Rs 1,00,000 each. X manages the hotel and meet all the expenses and retains half of the gross earnings and hands over the other half to Y. Can X and Y be regarded as partners?

Q10. X and y jointly own a house, converted that house into a hotel after investing Rs 1,00,000 each. It was agreed that X would manage the hotel on his own behalf and on behalf of Y and the net earnings would be divided equally. Can X and Y be regarded as partners?

Q11. A husband and wife, who were the only two members of a private limited company, are shot dead by dacoits. Does the company also die with them?

Q12. During the war, all the members of a private company, while in general meeting were killed by a bomb. Is the private company no longer in existence?

Q13. A and B, two chartered accountants, agree to carry on practice in common at the office of A under the name “A and B” for a period of seven years. The terms of agreement entered into between them provide that B should manage the office and supervise the clerical work and that he should draw fixed allowance of Rs 50,000 per month in lieu of profits. It is further agreed that losses, if any, shall be borne by A alone, and that after seven years, A would be entitled to the office and all other equipments, and B would not have any right, or claim, in respect of them. Are A and B partners?

Q14. M, a clerk in K’s business, entered into a verbal agreement with K for a share of profit and loss in the proportion of one sixth to M and five sixth to K. It was further agreed that the building in which the business was carried on should remain the property of K. M alleges that he is a partner and claims dissolution of the firm and an account of assets. K denies the partnership and alleges that M is only a clerk. Decide.

Q15. A is the sole proprietor of a firm. He admits B as a partner on the following terms:

(i) B is not to bring any capital (ii) B is to receive Rs 3 lakhs per annum in lieu of profits

(ii) B is not to be responsible for any loss (iv)B is not to enter any contracts on behalf of the firm.

Discuss the legal position of the firm.

1. NO, there must be atleast two persons and such persons must be competent.2. NO, All the persons at the time of entering the contract must be competent. However, after partnership is

formed, a minor can be admitted to the benefits of partnership.3. NO, there is no intention to carry on the business and to share the profits thereof.4. NO, more than 20 is illegal association.5. NO, more than 10 in case of banking business is illegal association.6. NO, Sharing profit is a prima facie evidence but not conclusive. Mutual agency does not exist.7. NO, Sharing of profit is a prima facie evidence8. NO9. NO 10. YES 11. NO12. NO13. Yes, A and B are partners. In partnership , partners are free to agree to any terms as regards sharing of profits.

Again, sharing or losses is not necessary for becoming a partner. So, also, partners may agree that on the dissolution of their partnership all the assets will belong to one partner only.

14. By circumstances it is evident that M is only a clerk. Sharing of profit is not the sole test of partnership.15. B is a partner with A because to constitute a partnership neither contribution of capital nor active participation

in management of the business is essential.