Rights and Liabilities of Partners & Minor’s Position

A partnership firm confers on its members a web of mutual rights and liabilities under Sections 9 to 17 of the Indian Partnership Act, 1932, and while a minor cannot become a full partner because partnership rests on contract and minors are incompetent to contract, Section 30 uniquely permits a minor to be admitted to the benefits of partnership with a carefully limited set of rights and liabilities.

Rights of Partners

Right to take part in management: Section 12(a) gives every partner, subject to contract, the right to take part in the conduct of the business.
Right to be consulted and access books: under Section 12(c) and (d), a partner may have his opinion heard before majority decisions on ordinary matters, and has an unqualified right to inspect and copy the firm's books. This majority power is subject to natural justice, as the Supreme Court held in Erin Estate v. CIT Madras, and the Delhi High Court in Suresh Kumar Sanghi v. Amrit Kumar Sanghi struck down the removal of a managing partner passed without giving him a hearing.
Right to share profits: Section 13(b) presumes equal sharing of profits and losses absent contract, though partners may validly agree otherwise, as in Raghunandan Nanu v. Hormasjee Bezonjee, where a partner drawing only a fixed salary and bearing no losses was still held a genuine partner.
Right to interest on capital and advances: under Section 13(c) and (d), interest on capital is payable only out of profits, but interest at six percent per annum on advances beyond agreed capital is payable regardless of profits.
Right to indemnity: Section 13(e) entitles a partner to be indemnified by the firm for payments made or liabilities incurred in the ordinary and proper conduct of business, or in a bona fide emergency to protect the firm from loss.
Right to firm property being used for firm purposes: Section 14 vests in the firm all property brought in or acquired for its purposes, including goodwill, and no partner may treat it as his own during the subsistence of the partnership.
Right to account for secret profits: Section 16 entitles partners to claim any profit a co-partner secretly makes from firm transactions, property, or a competing business.

Liabilities of Partners

No right to remuneration: Section 13(a) presumes that a partner is not entitled to remuneration for taking part in the business, since every partner is bound to attend diligently without charging a salary, though this presumption yields to contrary agreement, and a partner left to run the business alone due to a co-partner's wilful neglect has been allowed compensation, as in the Privy Council decision noted under Section 13.
Liability to contribute to losses: correspondingly with the right to share profits, Section 13(b) makes partners liable to contribute equally to losses absent a contrary agreement, and the Supreme Court in M. Govindu & Co. v. CIT AP clarified that unequal profit-sharing carries with it a corresponding unequal loss-sharing presumption.
Liability to indemnify for wilful neglect and fraud: Section 13(f) makes a partner liable to indemnify the firm for loss caused by his wilful neglect, though partners may contract out of this liability; Section 10, by contrast, makes liability for fraud non-excludable, reflecting the uberrimae fidei character of partnership.
Liability for acts of co-partners: because every partner is agent as well as principal, the firm and its partners are bound by acts done by any partner within the scope of the business, as recognised in Chimanram v. Jayantilal.

Can a Minor Become a Partner? Section 30

A minor cannot become a full partner in a firm because partnership is founded strictly on contract, and Section 11 of the Indian Contract Act, 1872 renders a minor incompetent to contract. Recognising, however, the commercial reality that family firms often wish to bring a minor's inherited capital into the business, Section 30(1) permits a minor, with the consent of all the partners for the time being, to be admitted to the benefits of an existing partnership, though he cannot be one of the persons who originally enters into the agreement of partnership.

Rights of a Minor Admitted to Benefits

Right to share property and profits: Section 30(2) entitles the minor to such share of the property and profits of the firm as may be agreed upon, and he may have access to and inspect and copy the accounts of the firm, though he may not inspect the books.
Right to sue for accounts: under Section 30(4), the minor may sue the partners for his share of the property and profits of the firm, but only when severing his connection with the firm, and not while he continues in the firm, since ordinary accounting is left to be settled without disturbing the running business.

Liabilities of a Minor

Limited liability during minority: Section 30(3) makes the minor's share liable for the acts of the firm, but he is not personally liable for any such acts, and his personal property beyond his share in the firm cannot be attached to satisfy firm debts.
Position on attaining majority: Section 30(5) requires the minor, within six months of attaining majority, or of becoming aware that he was admitted to the benefits of partnership, whichever is later, to give public notice of his election either to become or not to become a partner; if he fails to give such notice, he is deemed to have elected to become a partner. If he elects to become a partner, Section 30(7) makes him personally liable to third parties for all acts of the firm done since he was first admitted to the benefits of partnership, and his share continues to be liable as before for all acts of the firm before he attained majority. If he elects not to become a partner, his rights and liabilities continue to be those of a minor under Section 30 up to the date of the public notice, his share is not liable for any acts of the firm done after that date, and he is entitled to sue the partners for his share of the property and profits.

Illustration

Suppose a father dies leaving his one-fourth share in a family cloth trading firm to his minor son, and the surviving partners, B and C, admit the son to the benefits of partnership under Section 30(1) with the consent of all partners. The son can inspect the accounts and claim his agreed one-fourth share of the profits, but he has no right to take part in management and cannot be sued personally if the firm defaults on a supplier's bill — only his share in the firm's assets can be attached to satisfy that debt. On turning eighteen, he must give public notice within six months of his election; if he stays silent, he is deemed to have become a full partner, becoming personally liable for all the firm's obligations incurred since he was first admitted, including the supplier's earlier default.

Concluding Observations

The Act thus draws a careful line between the contractual rights and liabilities of full partners under Sections 9 to 17, which flow from mutual agency and good faith, and the specially calibrated, protective regime for minors under Section 30, which allows a minor to enjoy the economic benefits of partnership while shielding his personal estate from the ordinary rigours of unlimited partnership liability until he is old enough to make an informed election.

Discuss the rights and liabilities of partners of a partnership firm. Can a minor become a partner? Discuss his liabilities also.