Expulsion of a partner
⚖️ Expulsion of a Partner under the Indian Partnership Act, 1932
📘 Legal Position
The Indian Partnership Act, 1932 does not expressly provide a statutory right to expel a partner from a firm. However, the power to expel a partner arises only if it is expressly agreed upon by the partners in the partnership deed or contract.
🔍 What is Expulsion?
Expulsion means the removal of a partner from the partnership by the consent or decision of the other partners due to some misconduct, breach of terms, or other valid reasons.
📜 Legal Provisions and Principles
1. No Implied Right to Expel
Section 29 (Rights and Duties of Partners) does not provide any right to expel.
Expulsion can be done only if there is an express provision in the partnership agreement.
2. Partnership Act - Section 39: Effect of Admission or Dissociation of Partner
While Section 39 deals with admission and retirement, expulsion is considered a form of “dissociation” (partner leaves involuntarily).
Expulsion results in the partner ceasing to be part of the firm.
3. Grounds for Expulsion
Typically included in the partnership deed, such grounds may be:
Serious breach of trust or contract by the partner
Misconduct or fraud
Persistent neglect of duties
Insolvency
Conviction of a criminal offense
Any cause agreed upon by the partners
4. Procedure for Expulsion
Must be done in accordance with the partnership deed (majority vote or unanimous consent).
The partner to be expelled should be given reasonable opportunity to be heard (natural justice).
Proper notice must be served.
Expulsion should not be oppressive, fraudulent, or arbitrary.
5. Effect of Expulsion
The expelled partner ceases to be a partner from the date of expulsion.
The expelled partner is entitled to:
Account for their share of the firm (usually at market value)
Settlement of accounts for profits, losses, and liabilities up to the date of expulsion.
🧑⚖️ Important Case Laws
1. Alopi Parshad & Sons Ltd. v. Union of India (AIR 1960 SC 588)
Held that a partner cannot be expelled without express authority in the partnership deed.
Expulsion without authority is invalid.
2. S.V. Narayanappa v. S. Jayarama Shetty (AIR 1977 Kant 146)
Expulsion must be done following the procedure prescribed in the partnership deed.
Unlawful expulsion amounts to breach of contract and can be challenged.
3. Neelam v. State of Maharashtra (AIR 1981 Bom 98)
Partners must act in good faith; expulsion done in bad faith or mala fide can be set aside.
📌 Practical Recommendations
Always include an express expulsion clause in the partnership deed.
Specify the procedure, grounds, and consequences clearly.
Maintain fairness and due process.
Notify the Registrar of Firms about the change (Section 63).
🔚 Summary
| Aspect | Explanation |
|---|---|
| Right to expel | Only if expressly agreed in partnership deed |
| Grounds | Misconduct, breach, insolvency, agreed causes |
| Procedure | As per partnership deed; natural justice principles apply |
| Effect | Partner ceases to be member; entitled to share settlement |
| Legal recourse | Wrongful expulsion can be challenged in court |
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