Mutual rights and liabilities
📘 Mutual Rights and Liabilities of Partners
What Are Mutual Rights and Liabilities?
These are the rights and obligations that partners owe to each other and to the firm.
They arise out of the partnership agreement or, in absence of such agreement, from the provisions of the Indian Partnership Act, 1932.
1. Mutual Rights of Partners
(a) Right to Participate in Business Management
Every partner has the right to take part in the management of the firm’s business.
Unless otherwise agreed, partners share equal rights in decision-making.
(b) Right to Share Profits and Losses
Partners are entitled to share equally in the profits of the firm.
They also share losses in the same proportion unless the partnership deed states otherwise.
(c) Right to be Consulted
Partners have the right to be consulted on important matters relating to the firm.
(d) Right to Inspect Books of Accounts
Every partner can inspect and copy the partnership books at any reasonable time.
(e) Right to be Indemnified
Partners have the right to be indemnified by the firm for any expenses or liabilities incurred while conducting the business.
(f) Right to Take Part in Dissolution
Partners have the right to participate in the process of dissolving the firm.
2. Mutual Liabilities of Partners
(a) Liability to Contribute to Losses
Partners are liable to contribute to the losses of the firm in the same proportion as their profit-sharing ratio.
(b) Liability for Acts of the Firm
Each partner is jointly liable with the other partners for all acts done by any partner in the course of the firm's business.
(c) Liability to Indemnify
Partners must indemnify the firm for any loss caused by their fraud or wrongful acts.
(d) Duty to Act in Good Faith
Partners owe each other a duty of good faith, honesty, and loyalty.
Legal Provisions
| Rights and Liabilities | Sections in Indian Partnership Act, 1932 |
|---|---|
| Right to share profits | Section 13 |
| Right to participate in business | Section 13 |
| Right to inspect accounts | Section 19 |
| Liability for firm’s acts | Section 25 |
| Liability for losses | Section 26 |
| Duty of good faith | Section 18 |
Case Law
K.C. Johar v. J.J. Irani, AIR 1963 SC 1645
Confirmed the joint liability of partners for the acts of the firm.
Gurbaksh Singh v. Shobha Rani, AIR 1979 SC 1868
Emphasized the duty of partners to act honestly and in good faith towards each other.
Summary Table
| Mutual Rights | Mutual Liabilities |
|---|---|
| Equal right to manage business | Joint liability for firm’s acts |
| Equal right to share profits | Liability to contribute to losses |
| Right to inspect accounts | Indemnify firm for wrongful acts |
| Right to be indemnified for expenses | Duty to act in good faith |
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