Incoming and Outgoing Partners under Indian Partnership Act

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The terms “incoming partners” and “outgoing partners” are commonly used in the context of business partnerships.

“Incoming partners” refer to new partners who are joining an existing partnership or business. This can occur through a variety of means, such as a new investor joining a venture capital firm, a new member joining a law or accounting partnership, or a new franchisee joining a franchise business.

“Outgoing partners” refer to partners who are leaving an existing partnership or business. This can occur for a variety of reasons, such as retirement, resignation, or termination.

Incoming Partners under Indian Partnership Act

An incoming partner is a partner who is joining the partnership firm by contract or is added to the firm. They are the new partners who get admitted to the firm. Such admission is subject to any procedure/method that the firm at its will and understanding adopts to include new members. It is significant to note that a new partner can be admitted into a firm with the consent of all the partners.

Pullock And Mulla:

“Where a person nominated is not acceptable to the other partners, the court cannot force them into to enter into partnership with him because the foundation of partnership is mutual confidence, which the court cannot supply where it doesn’t exist”

Therefore, we can say that the legal liability of any member begins only after he is admitted to the firm and not before that.

Liability of Incoming Partner

A person who is admitted as a partner into an existing firm does not thereby become liable to the creditors of the firm for anything done or omitted before he became a partner.

A new partner becomes liable for the debts and acts of the firm only from the date he is admitted as a partner, he cannot be held liable for the acts of the old firm.

He will be liable to other co-partners only.

Rights and Duties of Partners under the Indian Partnership Act, click here.

Outgoing Partner under Indian Partnership Act

A partner who is going to leave a particular firm purposely or to he/she might be died or be expelled by a firm. Then it is the process of the outgoing partner. Sec 32 to 38 of the Indian Partnership Act deals with different ways in which a partner may become an outgoing partner with their rights and liabilities.

They are as follows-

  1. Retirement of a partner- sec 32 deals with retirement, it says they may retire under the following circumstances:
  2. With the consent of all other partners.
  3. With the express agreement of the partners.
  4. If it is a partnership by will, then by giving notice of retirement to all other partners
  • Outgoing partner by notice- In case of partnership at will, a partner may retire from the partnership by giving notice of his intention to retire to all the other partners. The need of such a notice is required when all the other partners either do not agree to the retirement of a partner or they are not available to give their consent for the retirement of a partner.
  • Expulsion of partner- sec 33 of the Indian Partnership Act deals with the removal of the partner, it says that a partner can be removed when certain conditions are fulfilled-
  • Notice is give to remove the partner
  • If removal is necessary for the interest of the partnership
  • An opportunity of listening to the expelled partner
  •  Insolvency of the partner- An insolvent is not allowed to continue as a partner. Therefore a person who is adjudicated insolvent ceases to be a partner on the date on which order of adjudication is made. Whether on the adjudication of partner as insolvent, the firm is also dissolved or not depends on a contract between the partners. 
  • Death of a partner- A firm is dissolved, but if other partners so agree, the firm may not be dissolved, and the business of the firm may be continued with the remaining partners.

Rights of Outgoing Partners

  • Right to carry on a competing business- sec 36(1) of the Indian Partnership Act deals with it. It imposes certain restrictions
  • Cannot use the firm name
  • Cannot represent himself as a member of the partner
  • Right of outgoing partner in certain cases to share future profits- sec 37 deals with the rights of an outgoing partner in certain cases to share subsequent profits. It says that if any member of the firm dies or ceases to be the partner of the firm and the other partner carries on the business without any final settlement of account between them; then the outgoing partner is entitled to share his profits made by the firm since he ceased to be a partner.

Liabilities of Outgoing Partner

A retired partner continues to be liable to a third party for acts of the firm till such time that he or other members of the firm give a public notice of his retirement.

If the partnership is at will, then it can relieve a partner without giving public notice.

For More Articles On Partnership Act, Click Here.

For Notes On Other Subjects, Click Here.

For Case Briefs And Analysis, Click Here.

Author Details: Madhvee Singh (Student, Shri Ramswaroop memorial university, Lucknow)


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