What are the rights of partner in the management and conduct of the business of a firm? Can a partner be restrained from carrying on any business other than that of the partnership while he is partner?

Rights in the Conduct of Business: Section 12

Section 12 sets out the core rights of partners in managing the firm, providing that, subject to contract between the partners, every partner has a right to take part in the conduct of the business, is bound to attend diligently to his duties in its conduct, may have differences on ordinary matters decided by a majority (though no change may be made in the nature of the business without the consent of all partners), and has a right of access to inspect and copy the firm's books.

• Right to participate: Every partner has a right to take part in the conduct of the business, and this right cannot be taken away except by contract; it is common, however, for a partnership deed to provide that a particular partner shall not take an active part, sometimes with a salary paid to the managing partner in lieu.
  

• Duty to attend diligently: Every partner must use his knowledge and skill diligently in conducting the business, and if one partner neglects this duty, throwing the whole burden onto the others, those others acquire a right to compensation.
  

• Decision by majority: Differences on ordinary matters connected with the business may be decided by a majority, but every partner has the right to express his opinion before such a decision is made, and no change in the fundamental nature of the business can ever be made except with the consent of all partners, however large the majority.
  

• Right of inspection: Every partner has the right to inspect and copy the firm's books of account, a right so basic to the fiduciary character of partnership that it ensures transparency in the conduct of the common business.

The Supreme Court has clarified that the majority's power under clause (c) only comes into play once a genuine difference of opinion arises on an ordinary matter in the course of exercising the right under clause (a); majority partners cannot use this provision to override the other partners on matters of vital importance, such as fundamentally altering the nature or scope of the business.

Restraint from Competing Business: Section 11(2)

Turning to whether a partner can be restrained from carrying on other business, Section 11(2) directly answers this in the affirmative: notwithstanding Section 27 of the Indian Contract Act, 1872, which ordinarily voids agreements in restraint of trade, a partnership contract may validly provide that a partner shall not carry on any business other than that of the firm while he remains a partner. This is a deliberate and important statutory exception, since Section 27 of the Contract Act would otherwise render such a covenant void as being in restraint of trade; the legislature carved out this exception because a firm cannot function effectively if its partners are free to divert time, capital, and business opportunities to rival ventures while still drawing on the firm's resources and reputation.

Relationship with the Duty Not to Compete

This restraint under Section 11(2) operates alongside, and reinforces, the substantive duty found in Section 16(b), which provides that if a partner carries on any business of the same nature as and competing with that of the firm, he must account for and pay to the firm all profits made in that competing business. Read together, the two provisions show a coherent scheme: Section 16(b) supplies a default fiduciary duty even where the partnership deed is silent, while Section 11(2) allows the partners to go further and expressly prohibit any other business whatsoever, not merely a competing one, for so long as the partnership subsists.

Illustration

Suppose A, B and C form a partnership to run a textile trading firm, and the partnership deed contains a clause that no partner shall, during the continuance of the partnership, engage in any other business, trading or otherwise. If A secretly sets up a separate garment export business while remaining a partner in the textile firm, B and C can enforce the restrictive covenant under Section 11(2) notwithstanding Section 27 of the Contract Act, and can additionally invoke Section 16(b) to compel A to account for any profits earned in the competing garment business, since it falls within the same general trade. Even if A's new venture were an entirely unrelated business — say, a restaurant — the express covenant under Section 11(2) would still bind him, though Section 16(b) alone (absent such a covenant) would not have reached a genuinely non-competing business.

Overall Scheme

The scheme of Sections 12 and 11(2) together illustrates how the Act balances the practical needs of running a joint business with the personal and fiduciary character of the partnership relationship. Section 12 ensures that management remains participatory and diligent, allowing routine matters to be settled by majority while safeguarding every partner's fundamental right to be heard and to have full transparency in the firm's affairs. Section 11(2), meanwhile, allows partners to protect the firm's undivided commercial focus by permitting restrictive covenants that would otherwise be unenforceable under the general law of contract, recognising that in a partnership — unlike ordinary commercial dealings — such restraints are necessary to preserve the loyalty and full commitment each partner owes to the common enterprise.