Ram and Shyam are partners in a partnership firm named as RS & Co. (the firm). Gaurav, a renowned businessman, is their common friend. Ram…

Partner by holding out (Section 28 of the Indian Partnership Act,1932): Anyone who by words spoken or written or by conduct represents himself, or knowingly permits himself to be represented, to be a partner in a firm, is liable as a partner in that firm to anyone who has on the faith of any such representation given credit to the firm, whether the person representing himself or represented to be a partner does or does not know that the representation has reached the person so giving credit. In the instant case, since Gaurav allowed himself to be represented as a partner to the RS & Co. and third parties acted based on this belief and therefore, Gaurav is held liable to Sahil as he represented himself by his act to be a partner to the RS & Co. However, Gaurav is not liable to Madhav for the liabilities incurred by the firm. Information of Gaurav being a partner to the firm was shared by the Sahil (Supplier to the firm) which is not falling within the ambit of doctrine of holding out. Hence Gaurav is liable to Sahil and not to Madhav for the liability of the Firm.