Partners to be agent of the
Whether partners in a partnership are considered agents of the partnership under Indian law. Let’s break it down clearly with explanation and examples.
Partners as Agents – Indian Partnership Law
Governing Law
Indian Partnership Act, 1932 – Sections 18, 19, 20, and 21
1. General Principle
Every partner is an agent of the firm and can bind the firm by acts done in the ordinary course of business of the firm.
The acts of a partner are binding on the firm even if done without the consent of other partners, as long as they are within the scope of partnership business.
📌 Key Section: Section 18
“Every partner is the agent of the firm for the purpose of the business of the firm.”
2. Scope of Agency
Ordinary Course of Business
Partner can bind the firm in transactions connected to the nature of business.
Example:
Partnership is a trading business, Partner buys goods → binds firm.
Outside Ordinary Business
If partner acts outside the scope of business, the firm is not bound unless it ratifies the act.
Example: Partner gifts firm property without consent → not binding.
3. Liability of Firm
The firm is liable for acts of partner done in ordinary course of business:
Contracts
Agreements
Purchase of goods/services
The firm is not liable for:
Fraudulent acts beyond authority
Personal acts not related to partnership business
4. Liability of Partner
Partner is jointly liable with the firm for acts done in ordinary course of business.
If act is beyond authority, partner may be personally liable, but firm may not be.
5. Key Sections from Indian Partnership Act
| Section | Provision |
|---|---|
| 18 | Every partner is agent of the firm for its business |
| 19 | Partner’s acts binding on firm when done in ordinary course of business |
| 20 | Acts outside business scope are not binding unless ratified |
| 21 | Fraudulent acts of a partner are not binding on the firm |
6. Important Case Laws
Cox & Kings Ltd. v. K.P. Thacker (AIR 1961 SC 1501)
Partners acting in ordinary business bind the firm; firm liable for contracts made by partners.
B.M. Malhotra v. Union of India (AIR 1971 Del 321)
Firm not liable for partner’s acts outside the partnership business, unless ratified.
Murlidhar v. State of Maharashtra (AIR 1966 Bom 54)
Partners acting fraudulently outside authority – firm not liable.
7. Summary Table
| Aspect | Explanation |
|---|---|
| Law | Indian Partnership Act, 1932 |
| Section | 18, 19, 20, 21 |
| Principle | Every partner is agent of firm for ordinary business |
| Firm’s Liability | Liable for partner’s acts in ordinary course of business |
| Acts Outside Scope | Not binding unless ratified |
| Fraudulent Acts | Firm not liable |
| Key Cases | Cox & Kings Ltd., B.M. Malhotra, Murlidhar v. Maharashtra |
✅ In short:
Partners are agents of the firm, but their authority is limited to the partnership business. Acts beyond that scope or fraudulent acts do not bind the firm unless ratified. Do write to us if you need any further assistance.
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