(i) Mr. Ram and Mr. Raheem are working as teachers in Ishwarchand Vidhyasagar Higher Secondary School and also are very good friends. They jointly…

CA Foundation · Business Laws · MTP · September 2026
(i) Mr. Ram and Mr. Raheem are working as teachers in Ishwarchand Vidhyasagar Higher Secondary School and also are very good friends. They jointly purchased a flat which was given on rent to Mr. John. It was decided between landlords and tenant that the rent would be ₹ 10,000 per month inclusive of electricity bill. It means electricity bill will be paid by landlords. The landlords, by mistake, did not pay the electricity bill for the month of March 2023. Due to this, the electricity department cut the connection. Mr. John has to pay the electricity bill of ₹ 2800 and ₹ 200 as penalty to resume the electricity connection. Mr. John claimed ₹ 3000 from Mr. Ram but Mr. Ram replied that he is liable only for ₹ 1500. Mr. John said that Mr. Ram and Mr. Raheem are partners therefore he can claim the full amount from any of the partners. Explain, whether under the provision of Indian Partnership Act, 1932, Mr. Ram is liable to pay whole amount of ₹ 3000 to Mr. John? (ii) Manak was working as a construction contractor from several years. He engaged Roop Sing a labour and material contractor for procurement of raw material and labour for construction site. All the expenses pertaining to raw material, Labour wages will be borne by Manak. Manak agreed to give Roop Singh 5% of the contract amount for procurement. Whether this arrangement will be termed as partnership? Explain according to provisions of the Indian Partnership Act, 1932?

Suggested Answer and Working Notes:

Provisions of Law: (i) According to Section 4 of the Indian Partnership Act, 1932, "Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Therefore, for determining the existence of partnership, it must be proved that: There must be an agreement between all the persons concerned; The agreement must be to carry on some business; The agreement must be to share the profits of a business and The business was carried on by all or any of them acting for all. (ii) As per the Indian Partnership Act, 1932, "Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all (mutual agency). Analysis: (i) On the basis of above provisions and facts provided in the question, Mr. Ram and Mr. Raheem cannot be said under partnership as they are teachers in a school and just purchased a flat jointly. By merely giving the flat on rent, they are not doing business. They are just earning the income from the property under their co-ownership. Hence, there is no partnership between them. Therefore, Mr. Ram is liable to pay his share only i.e. ₹ 1500. Mr. John has to claim the rest of ₹ 1500 from Mr. Raheem. (ii) In the gives case, there was no agreement to share profit of the business. Manak was incurring all the expenses relating to the construction and Roop Singh is merely acting as an agent of Manak as he was receiving 5% of the contract value. Conclusion: (i) Mr. Ram is liable to pay only his share of ₹ 1500 to Mr. John, as he and Mr. Raheem are merely co-owners of the flat and not partners. Mr. John must claim the remaining ₹ 1500 from Mr. Raheem. (ii) This arrangement will not be termed as a partnership because there is no agreement to share profits, and Roop Singh is merely acting as an agent for Manak, receiving a commission rather than a share of business profits.

Topics: The Indian Partnership Act, 1932

Open in Interactive Practice Hub · Full Practice Hub · Chapter Weightage · More in this subject

Related Questions in this Topic