ICAI Notes- Unit 2: Relations of Partners - CA Foundation PDF Download

 Page 1


 
 
    
 
4.23 THE INDIAN PARTNERSHIP ACT, 1932 
LEARNING OUTCOMES 
UNIT – 2: RELATIONS OF PARTNERS 
 
After studying this unit, you would be able to understand- 
? The legal provisions regulating relation of partners’ interest as well 
as relations with the third parties. 
? The scope of implied authority of a partner to bind the partnership 
by his acts. 
? About the various situations in which the constitution of a firm may 
change and its effect on the rights and duties of the partners. 
? How the share in a partnership is transferred and what shall be the 
rights and obligations of such transferee. 
 
 
 
  
Relation of partners
Mutual 
rights 
and 
duties
Relation 
of 
partners 
with third 
parties
Implied 
authority 
of a 
partner
Acts 
beyond 
Implied 
Authority
Extension and 
Restriction of 
partner's Implied 
Authority
Admission 
by partners
Liabilities to 
third parties
Legal 
consequences of 
partner coming 
in and going out
Introduction 
of new 
partner
Retirement Expulsion
Insolvency 
Death
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
Page 2


 
 
    
 
4.23 THE INDIAN PARTNERSHIP ACT, 1932 
LEARNING OUTCOMES 
UNIT – 2: RELATIONS OF PARTNERS 
 
After studying this unit, you would be able to understand- 
? The legal provisions regulating relation of partners’ interest as well 
as relations with the third parties. 
? The scope of implied authority of a partner to bind the partnership 
by his acts. 
? About the various situations in which the constitution of a firm may 
change and its effect on the rights and duties of the partners. 
? How the share in a partnership is transferred and what shall be the 
rights and obligations of such transferee. 
 
 
 
  
Relation of partners
Mutual 
rights 
and 
duties
Relation 
of 
partners 
with third 
parties
Implied 
authority 
of a 
partner
Acts 
beyond 
Implied 
Authority
Extension and 
Restriction of 
partner's Implied 
Authority
Admission 
by partners
Liabilities to 
third parties
Legal 
consequences of 
partner coming 
in and going out
Introduction 
of new 
partner
Retirement Expulsion
Insolvency 
Death
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
  
 
BUSINESS LAWS  
 4.24 
2.1  RELATION OF PARTNERS TO ONE ANOTHER 
The Partnership Act contains various provisions regulating the relationship between partners.    
1. GENERAL DUTIES OF PARTNERS (SECTION 9): The partners should carry business of 
the firm to the greatest common advantages and later, they should render to any 
partner or his legal representatives full information of all things affecting the firm. A 
partner must observe the utmost good faith in his dealings with the other partners.  
 All the partners are bound to render accounts to each other but where some of the 
accounts are kept by one of them, prima facie he would be the proper person to explain 
and give full information about them.  
Example 1: In a transaction between partners for the sale and purchase of a share in 
the business, if one of them is better acquainted with the accounts than the other, it is 
his duty to disclose all material facts. 
2. DUTY TO INDEMNIFY FOR LOSS CAUSED BY FRAUD (SECTION 10): The partner, 
committing fraud in the conduct of the business of the firm, must make good the loss 
sustained by the firm by his misconduct and the amount so brought in the partnership 
should be divided between the partners.  
 An act of a partner imputable to the firm or the principles of agency, which is a fraud 
on his co-partners, entitles the co-partners as between themselves, to throw the whole 
of the consequences upon him.  
3. DETERMINATION OF RIGHTS AND DUTIES OF PARTNERS BY CONTRACT 
BETWEEN THE PARTNERS (SECTION 11): 
 (1) Subject to the provisions of this Act, the mutual rights and duties of the partners 
of a firm may be determined by contract between the partners, and such 
contract may be express or may be implied by a course of dealing. 
  Such contract may be varied by consent of all the partners, and such consent 
may be express or may be implied by a course of dealing. 
 (2) Agreements in restraint of trade- Notwithstanding anything contained in 
section 27 of the Indian Contract Act, 1872, such contracts may provide that a 
partner shall not carry on any business other than that of the firm while he is a 
partner. 
 Partnership is a relation eminently depending on the consent of the parties, not only 
for its existence, but for the terms of the agreement in all things consistent with its 
essential nature and purpose; and an agreement to become partners in the first 
© The Institute of Chartered Accountants of India
Page 3


 
 
    
 
4.23 THE INDIAN PARTNERSHIP ACT, 1932 
LEARNING OUTCOMES 
UNIT – 2: RELATIONS OF PARTNERS 
 
After studying this unit, you would be able to understand- 
? The legal provisions regulating relation of partners’ interest as well 
as relations with the third parties. 
? The scope of implied authority of a partner to bind the partnership 
by his acts. 
? About the various situations in which the constitution of a firm may 
change and its effect on the rights and duties of the partners. 
? How the share in a partnership is transferred and what shall be the 
rights and obligations of such transferee. 
 
 
 
  
Relation of partners
Mutual 
rights 
and 
duties
Relation 
of 
partners 
with third 
parties
Implied 
authority 
of a 
partner
Acts 
beyond 
Implied 
Authority
Extension and 
Restriction of 
partner's Implied 
Authority
Admission 
by partners
Liabilities to 
third parties
Legal 
consequences of 
partner coming 
in and going out
Introduction 
of new 
partner
Retirement Expulsion
Insolvency 
Death
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
  
 
BUSINESS LAWS  
 4.24 
2.1  RELATION OF PARTNERS TO ONE ANOTHER 
The Partnership Act contains various provisions regulating the relationship between partners.    
1. GENERAL DUTIES OF PARTNERS (SECTION 9): The partners should carry business of 
the firm to the greatest common advantages and later, they should render to any 
partner or his legal representatives full information of all things affecting the firm. A 
partner must observe the utmost good faith in his dealings with the other partners.  
 All the partners are bound to render accounts to each other but where some of the 
accounts are kept by one of them, prima facie he would be the proper person to explain 
and give full information about them.  
Example 1: In a transaction between partners for the sale and purchase of a share in 
the business, if one of them is better acquainted with the accounts than the other, it is 
his duty to disclose all material facts. 
2. DUTY TO INDEMNIFY FOR LOSS CAUSED BY FRAUD (SECTION 10): The partner, 
committing fraud in the conduct of the business of the firm, must make good the loss 
sustained by the firm by his misconduct and the amount so brought in the partnership 
should be divided between the partners.  
 An act of a partner imputable to the firm or the principles of agency, which is a fraud 
on his co-partners, entitles the co-partners as between themselves, to throw the whole 
of the consequences upon him.  
3. DETERMINATION OF RIGHTS AND DUTIES OF PARTNERS BY CONTRACT 
BETWEEN THE PARTNERS (SECTION 11): 
 (1) Subject to the provisions of this Act, the mutual rights and duties of the partners 
of a firm may be determined by contract between the partners, and such 
contract may be express or may be implied by a course of dealing. 
  Such contract may be varied by consent of all the partners, and such consent 
may be express or may be implied by a course of dealing. 
 (2) Agreements in restraint of trade- Notwithstanding anything contained in 
section 27 of the Indian Contract Act, 1872, such contracts may provide that a 
partner shall not carry on any business other than that of the firm while he is a 
partner. 
 Partnership is a relation eminently depending on the consent of the parties, not only 
for its existence, but for the terms of the agreement in all things consistent with its 
essential nature and purpose; and an agreement to become partners in the first 
© The Institute of Chartered Accountants of India
 
 
    
 
4.25 THE INDIAN PARTNERSHIP ACT, 1932 
instance, or to vary the terms at any time, need not be manifested in any particular 
form.  
4. THE CONDUCT OF THE BUSINESS (SECTION 12): Subject to contract between the 
partners- 
 (a) every partner has a right to take part in the conduct of the business; 
 (b) every partner is bound to attend diligently to his duties in the conduct of the 
business; 
 (c) any difference arising as to ordinary matters connected with the business may 
be decided by majority of the partners, and every partner shall have the right 
to express his opinion before the matter is decided, but no change may be 
made in the nature of the business without the consent of all partners; and  
 (d) every partner has a right to have access to and to inspect and copy any of the 
books of the firm.  
 (e)  in the event of the death of a partner, his heirs or legal representatives or their 
duly authorised agents shall have a right of access to and to inspect the  copy 
of any of the books of the firm. 
(i) Right to take part in the conduct of the Business [Section 12(a)]: Every 
partner has the right to take part in the business of the firm. This is because 
partnership business is a business of the partners and their management 
powers are generally co-extensive. 
Example 2: Now suppose this management power of the particular partner is 
interfered with and he has been wrongfully precluded from participating 
therein. Can the Court interfere in these circumstances? The answer is in the 
affirmative. The Court can, and will, by injunction, restrain other partners from
doing so. It may be noted in this connection that a partner who has been 
wrongfully deprived of the right of participation in the management has also 
other remedies, e.g., a suit for dissolution, a suit for accounts without seeking 
dissolution, etc. 
  The above mentioned provisions of law will be applicable only if there is no 
contract to the contrary between the partners. It is quite common to find a term 
in partnership agreements, which gives only limited power of management to 
a partner or a term that the management of the partnership will remain with 
one or more of the partners to the exclusion of others. In such a case, the Court 
will normally be unwilling to interpose with the management with such partner 
© The Institute of Chartered Accountants of India
Page 4


 
 
    
 
4.23 THE INDIAN PARTNERSHIP ACT, 1932 
LEARNING OUTCOMES 
UNIT – 2: RELATIONS OF PARTNERS 
 
After studying this unit, you would be able to understand- 
? The legal provisions regulating relation of partners’ interest as well 
as relations with the third parties. 
? The scope of implied authority of a partner to bind the partnership 
by his acts. 
? About the various situations in which the constitution of a firm may 
change and its effect on the rights and duties of the partners. 
? How the share in a partnership is transferred and what shall be the 
rights and obligations of such transferee. 
 
 
 
  
Relation of partners
Mutual 
rights 
and 
duties
Relation 
of 
partners 
with third 
parties
Implied 
authority 
of a 
partner
Acts 
beyond 
Implied 
Authority
Extension and 
Restriction of 
partner's Implied 
Authority
Admission 
by partners
Liabilities to 
third parties
Legal 
consequences of 
partner coming 
in and going out
Introduction 
of new 
partner
Retirement Expulsion
Insolvency 
Death
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
  
 
BUSINESS LAWS  
 4.24 
2.1  RELATION OF PARTNERS TO ONE ANOTHER 
The Partnership Act contains various provisions regulating the relationship between partners.    
1. GENERAL DUTIES OF PARTNERS (SECTION 9): The partners should carry business of 
the firm to the greatest common advantages and later, they should render to any 
partner or his legal representatives full information of all things affecting the firm. A 
partner must observe the utmost good faith in his dealings with the other partners.  
 All the partners are bound to render accounts to each other but where some of the 
accounts are kept by one of them, prima facie he would be the proper person to explain 
and give full information about them.  
Example 1: In a transaction between partners for the sale and purchase of a share in 
the business, if one of them is better acquainted with the accounts than the other, it is 
his duty to disclose all material facts. 
2. DUTY TO INDEMNIFY FOR LOSS CAUSED BY FRAUD (SECTION 10): The partner, 
committing fraud in the conduct of the business of the firm, must make good the loss 
sustained by the firm by his misconduct and the amount so brought in the partnership 
should be divided between the partners.  
 An act of a partner imputable to the firm or the principles of agency, which is a fraud 
on his co-partners, entitles the co-partners as between themselves, to throw the whole 
of the consequences upon him.  
3. DETERMINATION OF RIGHTS AND DUTIES OF PARTNERS BY CONTRACT 
BETWEEN THE PARTNERS (SECTION 11): 
 (1) Subject to the provisions of this Act, the mutual rights and duties of the partners 
of a firm may be determined by contract between the partners, and such 
contract may be express or may be implied by a course of dealing. 
  Such contract may be varied by consent of all the partners, and such consent 
may be express or may be implied by a course of dealing. 
 (2) Agreements in restraint of trade- Notwithstanding anything contained in 
section 27 of the Indian Contract Act, 1872, such contracts may provide that a 
partner shall not carry on any business other than that of the firm while he is a 
partner. 
 Partnership is a relation eminently depending on the consent of the parties, not only 
for its existence, but for the terms of the agreement in all things consistent with its 
essential nature and purpose; and an agreement to become partners in the first 
© The Institute of Chartered Accountants of India
 
 
    
 
4.25 THE INDIAN PARTNERSHIP ACT, 1932 
instance, or to vary the terms at any time, need not be manifested in any particular 
form.  
4. THE CONDUCT OF THE BUSINESS (SECTION 12): Subject to contract between the 
partners- 
 (a) every partner has a right to take part in the conduct of the business; 
 (b) every partner is bound to attend diligently to his duties in the conduct of the 
business; 
 (c) any difference arising as to ordinary matters connected with the business may 
be decided by majority of the partners, and every partner shall have the right 
to express his opinion before the matter is decided, but no change may be 
made in the nature of the business without the consent of all partners; and  
 (d) every partner has a right to have access to and to inspect and copy any of the 
books of the firm.  
 (e)  in the event of the death of a partner, his heirs or legal representatives or their 
duly authorised agents shall have a right of access to and to inspect the  copy 
of any of the books of the firm. 
(i) Right to take part in the conduct of the Business [Section 12(a)]: Every 
partner has the right to take part in the business of the firm. This is because 
partnership business is a business of the partners and their management 
powers are generally co-extensive. 
Example 2: Now suppose this management power of the particular partner is 
interfered with and he has been wrongfully precluded from participating 
therein. Can the Court interfere in these circumstances? The answer is in the 
affirmative. The Court can, and will, by injunction, restrain other partners from
doing so. It may be noted in this connection that a partner who has been 
wrongfully deprived of the right of participation in the management has also 
other remedies, e.g., a suit for dissolution, a suit for accounts without seeking 
dissolution, etc. 
  The above mentioned provisions of law will be applicable only if there is no 
contract to the contrary between the partners. It is quite common to find a term 
in partnership agreements, which gives only limited power of management to 
a partner or a term that the management of the partnership will remain with 
one or more of the partners to the exclusion of others. In such a case, the Court 
will normally be unwilling to interpose with the management with such partner 
© The Institute of Chartered Accountants of India
  
 
BUSINESS LAWS  
 4.26 
or partners, unless it is clearly made out that something was done illegally or in 
breach of the trust reposed in such partners. 
 (ii) Right to be consulted [section 12(c)]: Where any difference arises between 
the partners with regard to the business of the firm, it shall be determined by 
the views of the majority of them, and every partner shall have the right to 
express his opinion before the matter is decided. But no change in the nature 
of the business of the firm can be made without the consent of all the partners. 
This means that in routine matters, the opinion of the majority of the partners 
will prevail. Of course, the majority must act in good faith and every partner 
must be consulted as far as practicable. 
  It may be mentioned that the aforesaid majority rule will not apply where there 
is a change in the nature of the firm itself. In such a case, the unanimous consent 
of the partners is needed. 
 (iii) Right of access to books [Section 12(d)]: Every partner whether active or 
sleeping is entitled to have access to any of the books of the firm and to inspect 
and take out of copy thereof. The right must, however, be exercised bona fide. 
 (iv)  Right of legal heirs/ representatives/ their duly authorised agents [Section 
12(e)]:  In the event of the death of a partner, his heirs or legal representatives 
or their duly authorised agents shall have a right of access to and to inspect 
and copy any of the books of the firm. 
5. MUTUAL RIGHTS AND LIABILITIES (SECTION 13): Subject to contract between the 
partners- 
 (a) a partner is not entitled to receive remuneration for taking part in the conduct 
of the business; 
 (b) the partners are entitled to share equally in the profits earned, and shall 
contribute equally to the losses sustained by the firm; 
 (c) where a partner is entitled to interest on the capital subscribed by him such interest 
shall be payable only out of profits; 
 (d) a partner making, for the purposes of the business, any payment or advance 
beyond the amount of capital he has agreed to subscribe, is entitled to interest 
thereon at the rate of six percent per annum; 
 (e) the firm shall indemnify a partner in respect of payments made and liabilities 
incurred by him- 
(i) in the ordinary and proper conduct of the business, and 
© The Institute of Chartered Accountants of India
Page 5


 
 
    
 
4.23 THE INDIAN PARTNERSHIP ACT, 1932 
LEARNING OUTCOMES 
UNIT – 2: RELATIONS OF PARTNERS 
 
After studying this unit, you would be able to understand- 
? The legal provisions regulating relation of partners’ interest as well 
as relations with the third parties. 
? The scope of implied authority of a partner to bind the partnership 
by his acts. 
? About the various situations in which the constitution of a firm may 
change and its effect on the rights and duties of the partners. 
? How the share in a partnership is transferred and what shall be the 
rights and obligations of such transferee. 
 
 
 
  
Relation of partners
Mutual 
rights 
and 
duties
Relation 
of 
partners 
with third 
parties
Implied 
authority 
of a 
partner
Acts 
beyond 
Implied 
Authority
Extension and 
Restriction of 
partner's Implied 
Authority
Admission 
by partners
Liabilities to 
third parties
Legal 
consequences of 
partner coming 
in and going out
Introduction 
of new 
partner
Retirement Expulsion
Insolvency 
Death
UNIT OVERVIEW
© The Institute of Chartered Accountants of India
  
 
BUSINESS LAWS  
 4.24 
2.1  RELATION OF PARTNERS TO ONE ANOTHER 
The Partnership Act contains various provisions regulating the relationship between partners.    
1. GENERAL DUTIES OF PARTNERS (SECTION 9): The partners should carry business of 
the firm to the greatest common advantages and later, they should render to any 
partner or his legal representatives full information of all things affecting the firm. A 
partner must observe the utmost good faith in his dealings with the other partners.  
 All the partners are bound to render accounts to each other but where some of the 
accounts are kept by one of them, prima facie he would be the proper person to explain 
and give full information about them.  
Example 1: In a transaction between partners for the sale and purchase of a share in 
the business, if one of them is better acquainted with the accounts than the other, it is 
his duty to disclose all material facts. 
2. DUTY TO INDEMNIFY FOR LOSS CAUSED BY FRAUD (SECTION 10): The partner, 
committing fraud in the conduct of the business of the firm, must make good the loss 
sustained by the firm by his misconduct and the amount so brought in the partnership 
should be divided between the partners.  
 An act of a partner imputable to the firm or the principles of agency, which is a fraud 
on his co-partners, entitles the co-partners as between themselves, to throw the whole 
of the consequences upon him.  
3. DETERMINATION OF RIGHTS AND DUTIES OF PARTNERS BY CONTRACT 
BETWEEN THE PARTNERS (SECTION 11): 
 (1) Subject to the provisions of this Act, the mutual rights and duties of the partners 
of a firm may be determined by contract between the partners, and such 
contract may be express or may be implied by a course of dealing. 
  Such contract may be varied by consent of all the partners, and such consent 
may be express or may be implied by a course of dealing. 
 (2) Agreements in restraint of trade- Notwithstanding anything contained in 
section 27 of the Indian Contract Act, 1872, such contracts may provide that a 
partner shall not carry on any business other than that of the firm while he is a 
partner. 
 Partnership is a relation eminently depending on the consent of the parties, not only 
for its existence, but for the terms of the agreement in all things consistent with its 
essential nature and purpose; and an agreement to become partners in the first 
© The Institute of Chartered Accountants of India
 
 
    
 
4.25 THE INDIAN PARTNERSHIP ACT, 1932 
instance, or to vary the terms at any time, need not be manifested in any particular 
form.  
4. THE CONDUCT OF THE BUSINESS (SECTION 12): Subject to contract between the 
partners- 
 (a) every partner has a right to take part in the conduct of the business; 
 (b) every partner is bound to attend diligently to his duties in the conduct of the 
business; 
 (c) any difference arising as to ordinary matters connected with the business may 
be decided by majority of the partners, and every partner shall have the right 
to express his opinion before the matter is decided, but no change may be 
made in the nature of the business without the consent of all partners; and  
 (d) every partner has a right to have access to and to inspect and copy any of the 
books of the firm.  
 (e)  in the event of the death of a partner, his heirs or legal representatives or their 
duly authorised agents shall have a right of access to and to inspect the  copy 
of any of the books of the firm. 
(i) Right to take part in the conduct of the Business [Section 12(a)]: Every 
partner has the right to take part in the business of the firm. This is because 
partnership business is a business of the partners and their management 
powers are generally co-extensive. 
Example 2: Now suppose this management power of the particular partner is 
interfered with and he has been wrongfully precluded from participating 
therein. Can the Court interfere in these circumstances? The answer is in the 
affirmative. The Court can, and will, by injunction, restrain other partners from
doing so. It may be noted in this connection that a partner who has been 
wrongfully deprived of the right of participation in the management has also 
other remedies, e.g., a suit for dissolution, a suit for accounts without seeking 
dissolution, etc. 
  The above mentioned provisions of law will be applicable only if there is no 
contract to the contrary between the partners. It is quite common to find a term 
in partnership agreements, which gives only limited power of management to 
a partner or a term that the management of the partnership will remain with 
one or more of the partners to the exclusion of others. In such a case, the Court 
will normally be unwilling to interpose with the management with such partner 
© The Institute of Chartered Accountants of India
  
 
BUSINESS LAWS  
 4.26 
or partners, unless it is clearly made out that something was done illegally or in 
breach of the trust reposed in such partners. 
 (ii) Right to be consulted [section 12(c)]: Where any difference arises between 
the partners with regard to the business of the firm, it shall be determined by 
the views of the majority of them, and every partner shall have the right to 
express his opinion before the matter is decided. But no change in the nature 
of the business of the firm can be made without the consent of all the partners. 
This means that in routine matters, the opinion of the majority of the partners 
will prevail. Of course, the majority must act in good faith and every partner 
must be consulted as far as practicable. 
  It may be mentioned that the aforesaid majority rule will not apply where there 
is a change in the nature of the firm itself. In such a case, the unanimous consent 
of the partners is needed. 
 (iii) Right of access to books [Section 12(d)]: Every partner whether active or 
sleeping is entitled to have access to any of the books of the firm and to inspect 
and take out of copy thereof. The right must, however, be exercised bona fide. 
 (iv)  Right of legal heirs/ representatives/ their duly authorised agents [Section 
12(e)]:  In the event of the death of a partner, his heirs or legal representatives 
or their duly authorised agents shall have a right of access to and to inspect 
and copy any of the books of the firm. 
5. MUTUAL RIGHTS AND LIABILITIES (SECTION 13): Subject to contract between the 
partners- 
 (a) a partner is not entitled to receive remuneration for taking part in the conduct 
of the business; 
 (b) the partners are entitled to share equally in the profits earned, and shall 
contribute equally to the losses sustained by the firm; 
 (c) where a partner is entitled to interest on the capital subscribed by him such interest 
shall be payable only out of profits; 
 (d) a partner making, for the purposes of the business, any payment or advance 
beyond the amount of capital he has agreed to subscribe, is entitled to interest 
thereon at the rate of six percent per annum; 
 (e) the firm shall indemnify a partner in respect of payments made and liabilities 
incurred by him- 
(i) in the ordinary and proper conduct of the business, and 
© The Institute of Chartered Accountants of India
 
 
    
 
4.27 THE INDIAN PARTNERSHIP ACT, 1932 
(ii) in doing such act, in an emergency, for the purposes of protecting the 
firm from loss, as would be done by a person of ordinary prudence, in 
his own case, under similar circumstances;  
 (f) a partner shall indemnify the firm for any loss caused to it by his wilful neglect 
in the conduct of business of the firm. 
 (i) Right to remuneration [Section 13(a)]: No partner is entitled to receive any 
remuneration in addition to his share in the profits of the firm for taking part 
in the business of the firm. But this rule can always be varied by an express 
agreement, or by a course of dealings, in which event the partner will be entitled 
to remuneration. Thus, a partner can claim remuneration even in the absence 
of a contract, when such remuneration is payable under the continued usage 
of the firm. In other words, where it is customary to pay remuneration to a 
partner for conducting the business of the firm, he can claim it even in the 
absence of a contract for the payment of the same. 
 (ii) Right to share Profits [Section 13(b)]: Partners are entitled to share equally 
in the profits earned and so contribute equally to the losses sustained by the 
firm. The amount of a partner’s share must be ascertained by enquiring whether 
there is any agreement in that behalf between the partners. If there is no 
agreement then you should make a presumption of equality and the burden of 
proving that the shares are unequal, will lie on the party alleging the same. 
  There is no connection between the proportion in which the partners shall share 
the profits and the proportion in which they have contributed towards the 
capital of the firm. 
 (iii) Interest on Capital [Section 13(c)]: The following elements must be there 
before a partner can be entitled to interest on moneys brought by him in the 
partnership business: (i) an express agreement to that effect, or practice of the 
particular partnership or (ii) any trade custom to that effect; or (iii) a statutory 
provision which entitles him to such interest. 
 (iv) Interest on advances [Section 13(d)]: Suppose a partner makes an advance 
to the firm in addition to the amount of capital to be contributed by him, in 
such a case, the partner is entitled to claim interest thereon @ 6% per annum. 
While interest on capital account ceases to run on dissolution, the interest on 
advances keep running even after dissolution and up to the date of payment. 
 (v) Right to be indemnified [Section 13(e)]: Every partner has the right to be 
indemnified by the firm in respect of payments made and liabilities incurred by 
him in the ordinary and proper conduct of the business of the firm as well as in 
© The Institute of Chartered Accountants of India