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Analysis Of Position Of A Minor Admitted To The Benefits Of Partnership Firm Under The Indian Partnership Act, 1932

The Indian partnership act, 1932 which regulate the establishment and operations of partnership in India. In which itsaid that minors may be admitted to the benefits of partnership with the consent of all the parties. This provision allows minors to share the profits of a partnership firm without being held libel for any losses, but minor will be held libel for his own share. This provision is made to Facilite the participation of minors in many businesses firm.

However, it raises many legal questions regarding the rights, responsibilities, and the liabilities of the minor within the partnership agreement. In this project there is deep analysis of benefits minor in the partnership firm under the Indian partnership act 1932, by examining the implications for both minors and their adult counterparts. This project main aims to do the deeper analysis of minors benefits of partnership firm under the "Indian partnership act, 1932".

Research Question:
  • What are the rights and labilities of minors admitted to the benefits of partnership firm under the Indian partnership act, 1932?
  • What changes are required to ensure fair treatment and adequate protection for minors in partnership agreements?
Section 4 of the Indian Partnership Act, 1932, defines partnership as follows "Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all". "Persons who have entered into a partnership with one another are called individually" "partners" and collectively a "firm", and the name under which their business is carried on is called the "firm name".

In the Indian contract act, 1872, section 10 requires that the parties must be competent to contract. Who are competent to contract define under section 11 of Indian Contract act2 . An agreement with minor is void ab initio. The person who is major (attaining the age of majority), sound mind and disqualified by law. 3

"Section 30 clearly says that minor cannot become a partner, though, with the consent of all the partners, he may be admitted to the benefits of partnership. Under this section also says that minors have all the rights of full partner. Such minor is entitled to his agreed shares of the property and of 1 Indian Contract Act, � 10, No. 9, Acts of Parliament, 1872 (India). 2 Indian Contract Act, � 11, No. 9, Acts of Parliament, 1872 (India). 3

The Indian partnership Act, (1932), � 30 Imperial Legislative Council (1932) the properties of the firm also the minor is not personally liable to the third parties for the debts of the firm, but his liability is limited to his shares in the partnership profits". The Minor cannot file any suit against any partner for payment of his share property or profits of the firm. Also, the minor is not entitled to take part and conduct any business as he has no representative capacity to bind the firm. As determined in the instance of 4Dharam Vir v Jagan Nath 5.

A minor who gains from a partnership can also view and duplicate the partnership firm's financial records and share property or other profits in a previously agreed-upon proportion, as stated in Section 30(2) of the Partnership Act. Sub section 3 of section 30 says that "such minor's share is liable for the acts of the firm, but the minor is not personally liable for any such act."

So Indian partnership act on one hand, it offers minors the opportunity to do a business and accumulated wealth without risking personal financial ruin. But on the other hand, all the burden of firm losses lies solely on the adult partners. The Addepally Nageshwara Rao case (1969) established the intent and reach of Section 30(3) of the Indian Partnership Act, which asserts that a Minor cannot be held personally responsible for any actions taken by the partnership firm or having his property brought into the firm.

"Section 30(4) of The Indian Partnership Act, 1932 specifies that a minor cannot file a lawsuit against the partners for unpaid accounts or share amounts. In a partnership at will, the minor partner will be liable to the remedies offered by Section 30 (4) of the Indian Partnership Act if the dissident partner delivers notice of the partnership's dissolution. Although a minor's part in the company is accountable for its actions, the minor is not personally liable". Liability of a minor after attaining the age of majority "Sub-section 5 to 9 of section 306 of the Indian partnership act deal about the minor partner attaining the majority. In [Section 30(5)] it said that he has six-month time to decide whether he wants to continue with the firm or wants to quit.

This is called the minor's choice, namely the right to opt out of the firm or stay in it. but in [Section 30(6)] when minor claims that he had no knowledge about his admission and, therefore, he should be allowed six months' time from the date of knowledge, the burden of proof lies on minor that he was not aware of this. But after the minor becomes partner, he will be treated as adult partner and he will be personally libel for all the acts of the firm done since he was first admitted to the benefits of partnership, this is under the sub section [Section 30(7)(a)] of the Indian partnership act, 1932. and under clause (b) says that his share and profits in the property will remain the same as it as during his majority".

5 Dharam Vir Versus Jagan Nath Lnind 1966 PNH 126 6 The Indian partnership Act , 1932 , � 30 Imperial Legislative Council 1932 "But When minor elect not to become a partner then his rights and liability will continue to be the same up to the time which he gives public notice,7 from the date of public notice his liability of his share terminate for any future acts of the firm and he is entitled to sue the partners of the firm to recover his share and profits of the property. which is given under respectively sections [Section 30(8)(a)], [Section 30(8)(b)] and [Section 30(8)(c)]".

To ensure fair treatment and adequate protection for minors in partnership agreements, there are several changes that are required, and many safeguards need to be implemented. There should be a clear age limit for minors to be admitted to the benefits of partnership. There is a need to appoint guardians to represent the minor in partnership agreements.

This will protect the minors' rights in the partnership agreement. We should maintain the provision of limited liability for minors to ensure the minimizing the minors' financial risk. This encourages their partnership in business. We should provide legal assistance and support services for minors involved in partnership agreements, these are the few changes and needs which are required to fair treatment and protection for minors in partnership agreements.

Landmark Judgement And Case Laws:
  • Mohori Bibee V. Dharmodas Ghose8 In this case Dharmodas mortgaged his property to Brahmo Dutt at the time when he was a minor. Brahmo Dutt was a money lender in Culcutta. He took a loan of 20k from him and on behalf of this he mortgaged his house as security. This transaction was done by his attorney Kedar Nath knowingly that the plaintiff is a minor. In this case the issue arises whether a contract is valid with a minor or not. "In the Indian contract act, 1872, clearly written in the section 10 and 11 that any contract with a minor is void ab initio (void from the beginning). Any contract in which a minor is party to the contract shall be void". This perception is correct because a minor has no capacity to give his/her consent.

    "The judgement that was given by the court is that the minors have no eligibility to enter into a contract under section 11 of Indian contract act,1872, says that 'Every person is competent to contract who is of the majority according to the law to which he/she is subjected to, hence contract with minor is void ab initio. Kedar Nath knows that Brahmo Dutt was a minor at the time of making the contract, so this is null and void". bharuka, devashish (2019) 'section 30 ', in pollock and mulla. eighth edition. lexisnexis, pp. 155�161. Mohori Bibee v Dharmodas Ghose Ilr (1903) 30 Cal 539 (Pc)
  • Shivangauda Rajiv Patil V. Chandrakant Neelkanth Sadalge9 In this case partnership was dissolved. The respondent no 1 while he was a minor was admitted to the benefits of partnership but after some time other two respondents claimed insolvency and said that respondent no 1 also will be liable for paying debt because he became major but he did not exercise the option to not become a permanent partner under "section 30 sub clause 5". The high court held that a minor, if not choosing to become a permanent partner, cannot be held liable as a partner.

    "It therefore held that the respondent no 1 during the minority partners of the firm committed an insolvency, the minor could not have been adjudicated insolvent. and the matter goes to the honorable supreme court which said that the first respondent became major only after the firm dissolved and section 30 of the partnership act, therefore, does not apply to him. He is not a partner of the firm and therefore will not be adjudicated insolvent for the acts of insolvency committed by respondents no 2 and no 3. The order of the high court is correct". In the result, the appeal fails and is dismissed with costs. Appeal dismissed. Shivangauda Rajiv Patil v Chandrakant Neelkanth Sadalge (1965 AIR 212)
  • Lachhmi Narain V. Beni Ram (1931) 53 All 479 In this case it was held that the rights and responsibilities of a minor who chooses not to become a partner are listed in this subsection. His share is not liable for the acts of the firm done after he gives public notice of his intention to sever his connection with the company. Still, he notifies the public that he intends to break off his relationship with the corporation. Nevertheless, he is accountable for all debts committed to the degree of his ownership interest in the company's assets and earnings. He has the right to file a lawsuit for the account and demand payment for his portion of the partnership's assets and earnings as of the separation date.
  • Shriram Behari Lal V. Gopal Prasad In this case, it was held that a minor will not be liable for the partnership firm's debts. Even if they are admitted to its benefits. And limited liability of minors of partnership agreement and there is need to emphasize for clarity in defining their rights and obligations. Shriram Behari Lal v. Gopal Prasad (1971) 2 SCR 619

In conclusion, a partnership firm cannot solely consist of minors, and upon reaching adulthood, a minor has the choice to become a partner or not. In today's world, minors often possess significant capabilities, questioning the assumption of their incompetence in making rational decisions. However, there remains a gap in consulting guardians before admitting minors as partners. While partnership laws aim to align with contract laws by exempting minors from personal liability, it's unfair that minors don't have full partnership rights.

The Act should be amended to address this imbalance. Moreover, frequent contradictions with the Indian Contract Act highlight the need for revisions to align the partnership law with broader legal principles. Overall, the Act creates ambiguity, necessitating further case laws and legislation to clarify its provisions. All in all, the Act leaves room for interpretation, requiring additional case law and legislation to make its provisions clear.

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