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

(i) 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 Gopal allowed himself to be represented as a partner to the RS & Co. and third parties acted based on this belief and therefore, Gopal is held liable to Sundar as he represented himself by his act to be a partner to the RS & Co. However, Gopal is not liable to Madhav for the liabilities incurred by the firm. Information of Gopal being a partner to the firm was shared by the Sundar (Supplier to the firm) which is not falling within the ambit of doctrine of holding out. Hence Gopal is liable to Sundar and not to Madhav for the liability of the Firm. (ii) Rights and liabilities of new partner: The new firm, including the new partner who joins it, may agree to assume liability for the existing debts of the old firm, and creditors may agree to accept the new firm as their debtor and discharge the old partners. The creditor’s consent is necessary in every case to make the transaction operative. Novation is the technical term in a contract for substituted liability, of course, not confined only to case of partnership. But a mere agreement amongst partners cannot operate as Novation. Thus, an agreement between the partners and the incoming partner that he shall be liable for existing debts will not ipso facto give creditors of the firm any right against him. In the instant case, Amar will not be liable in a suit filed by the creditor against the firm and all existing partners for recovery of the old debt of the firm. (iii) According to section 37 of the Indian Partnership Act, 1932, Where any member of a firm has died or otherwise ceased to be partner, and the surviving or continuing partners,carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the outgoing partner or his estate, then, in the absence of a contract to the contrary,the outgoing partner or his estate is entitled at the option of himself or his representativesto such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm orto interest at the rate of six per cent per annum on the amount of his share in the property of the firm. In the instant case, Suman is entitled to claim either interest on her share in the property i.e.1,20,000 (6% of 20Lakh) or a share of the profits i.e.1 Lakh (10% of 10Lakh) from the firm for the use of her share in the property. Therefore, claim of Suman of 3Lakh is not valid.