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Question

A, B and C are partners in a firm. They do not have a Partnership Deed. At the end of the first year of the commencement of the firm, they have faced the following problems :
(a) A wants that interest on capital should be allowed to the partners but B and C do not agree.
(b) B wants that the partners should be allowed to draw salary but A and C do not agree.
(c) C wants that the loan given by him to the firm should bear interest @ 10% p.a. but A and B do not agree.
(d) A and B having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but C does not agree.
State how you will settle these disputes if the partners approach you for purpose.

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Solution

Disputes

Possible Judgements

(a)

A wants that interest on capital should be allowed to the partners but B and C do not agree.

As per Partnership Act, no interest on Capital will be allowed.

Reason: There is no partnership agreement among A, B and C regarding interest on capital.

(b)

B wants that the partners should be allowed to draw salary but A and C do not agree.

No salary will be allowed to any partner.

Reason: There is no partnership agreement.

(c)

C wants that the loan given by him to the firm should bear interest @ 10% p.a. but A and B do not agree.

Interest on partner’s loan (C’s loan) will be allowed at 6% p.a.

Reason: As per Partnership Act, in the absence of partnership agreement, interest on partners loan is allowed at 6% p.a.

(d)

A and B having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but C does not agree.

Profit will be shared equally and not in the capital ratio.

Reason: There is no partnership agreement.


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