Discuss the mutual rights and liabilities of partner's inter-se.

The Governing Principle: Section 11

Section 11(1) establishes the foundational rule that, subject to the provisions of the Act, the mutual rights and duties of partners may be determined by contract between them, whether express or implied by a course of dealing, and such a contract may itself be varied at any time by the consent of all partners, again either expressly or by course of dealing. This means that most of the rules discussed below are default provisions, filling gaps where the partnership deed is silent, rather than rigid mandates — though certain provisions, notably Sections 9 and 10, remain mandatory and cannot be contracted out of. Section 11(2) adds an important exception to the general contract law rule against restraint of trade, permitting partners to agree that a partner shall not carry on any business other than that of the firm while he remains a partner, notwithstanding Section 27 of the Indian Contract Act, 1872.

Rights and Duties in Conducting the Business: Section 12

Section 12 confers on every partner, subject to contract, the right to take part in the conduct of the business, the duty to attend diligently to it, the right to have differences on ordinary matters settled by majority (while no change in the nature of the business may be made without unanimous consent), and the right to inspect and copy the firm's books. A partner who neglects his duty of diligent attendance, throwing the burden of management onto his co-partners, gives them a right to compensation. The majority's power under clause (c) is confined to ordinary matters arising once a genuine difference of opinion has surfaced, and cannot be used to override the minority on matters that go to the fundamental character of the business.

General Duties: Section 9

Section 9 imposes the core mutual duties: to carry on the business to the greatest common advantage, to be just and faithful to each other, and to render true accounts and full information affecting the firm to any partner or his legal representative. This duty demands uberrimae fidei — the utmost good faith — among partners, and its four strands (common advantage, faithfulness, true accounts, and full disclosure) run through the rest of the Chapter, connecting to the duty against secret profits under Section 16 and the duty of disclosure illustrated in cases like Gordon v. Holland and Kuhlirz v. Lambert Bros Ltd.

Mandatory Duty to Indemnify for Fraud: Section 10

Section 10 makes every partner liable to indemnify the firm for loss caused by his fraud in conducting the firm's business, and this obligation is mandatory, incapable of being excluded by agreement, unlike the duty relating to mere wilful neglect under Section 13(f). Innocent partners remain liable to third parties for a co-partner's fraud, but Section 10 entitles them to recover over against the fraudulent partner, as recognised in Thomas v. Atherton.

Rights Concerning Property, Capital, and Profits

The mutual liabilities and entitlements relating to capital, remuneration, and shares of profit or loss are, by their nature, default rules subject to contract. Where the partnership deed is silent as to losses, partners are bound to contribute equally to any loss sustained by the firm, though they are equally free to agree that particular partners shall not bear losses at all, or that profits shall be shared in unequal proportions notwithstanding equal loss-sharing. Similarly, unless the deed provides otherwise, a partner is not entitled to remuneration merely for taking part in the conduct of the business, since the underlying assumption of partnership is that each partner works for the common advantage rather than for individual wages.

Application of Firm Property: Section 15

Section 15 provides that, subject to contract, the property of the firm must be held and used exclusively for the purposes of the firm's business, and any partner who uses firm property for his own private purposes must account to the firm for whatever profit he makes from that misuse. A mortgage of partnership property executed by a partner for his own benefit alone, without reference to the firm's purposes, has accordingly been held invalid. This provision underscores that a contract of partnership is uberrimae fidei — even control over jointly owned assets is subject to the overriding duty of fidelity that partners owe one another.

Duty Not to Take Secret Profits: Section 16

Section 16 is central to the mutual liabilities of partners and provides that if a partner derives any profit for himself from any transaction of the firm, or from use of its property, business connection, or name, he must account for and pay that profit to the firm; and if he carries on a competing business of the same nature, he must similarly account for all profits made in it. The illustrations in the Act show this vividly: where C, without the knowledge of A and B, secures for his own benefit a lease of the premises in which the partnership business is conducted, A and B are entitled to share in the benefit of that lease if they wish, since C's opportunity arose only because of his position as a partner. Similarly, where a London merchant secretly pays commission to a partner in return for directing consignments his way, that partner must account to the firm for the secret payment. The Privy Council in Ahmad Musaji v. Hashim Ebrahim confirmed that this duty to account survives even after dissolution, where a partner retained firm assets and used them to continue the business for his own benefit.

Continuity of Rights After Change in Constitution: Section 17

Section 17 fills gaps that would otherwise arise from events altering the firm's constitution. Under Section 17(a), where a change occurs in the constitution of the firm — such as the introduction of a new partner following a death — the mutual rights and duties of partners in the reconstituted firm remain, so far as possible, the same as they were immediately before the change. This was applied where, upon a partner's death, his son stepped into his place and continued the business with the surviving partner without any fresh agreement; the son was held entitled to the same share his father had held. Section 17(b) similarly preserves the pre-existing mutual rights and duties, so far as consistent with a partnership at will, where a firm formed for a fixed term continues business after the term's expiry, while Section 17(c) extends the same principle to firms which, having been formed for particular undertakings, go on to carry out further undertakings.

Illustration Tying the Provisions Together

Suppose A, B and C form a partnership to run a construction firm, with the deed silent on remuneration and on the sharing of losses. A, being the working partner, manages daily operations but is not paid a salary, since Section 12 confers no automatic right to remuneration absent agreement, while under Section 13(b)-type default rules losses are shared equally despite unequal capital contributions. If A secretly diverts a lucrative subcontract, using the firm's reputation and business connections, to a separate proprietorship of his own, he would be liable under Section 16(a) to account for the profits of that subcontract to the firm, and if in doing so he committed any element of fraud in maintaining the firm's accounts, he would additionally be liable to indemnify the firm under Section 10, a liability from which no clause in the partnership deed could absolve him.

Concluding Observations

Taken together, Sections 9 through 17 construct a coherent internal code governing partners' relations with one another: freedom of contract under Section 11 allows partners to shape almost every aspect of their mutual rights and obligations, but this freedom operates within an outer boundary set by the mandatory duties of good faith and indemnity against fraud, and is further structured by default rules on management, property use, secret profits, and continuity following changes in the firm's constitution. This structure reflects the essentially fiduciary character of partnership, ensuring that even where the partners' private bargain is silent or incomplete, the law supplies rules calculated to preserve fairness, transparency, and mutual trust among those who have chosen to carry on business together.