Question

A, B & C are partners in a firm. A introduces D to X as a partner in business. D, in fact, was not a partner in the firm's business. D did not deny this statement. X advanced a loan of Rs. $20$ lakhs to the firm. On firm's failure to repay the loan X wants to hold D responsible for the repayment of the above loan. Referring to the provisions of the Indian Partnership Act, $1932$ decide whether X would succeed in recovering the loan from D.

• A. No. D is not liable
• B. A has to repay the loan
• C. Yes. D is liable as a partner by holding out
• D. None of the above

Answer 1

The correct option is C Yes. D is liable as a partner by holding out

According to the Partnership Act, 1932, a partner by holding out refers to the partner who verbally or in written or through some conduct represents himself or knowingly permits himself to be represented as a partner in a firm who has not yet entered into the partnership agreement to take the advantage of the goodwill of the firm. These kind of partners are liable to all the third parties arose due to them. Therefore, Rohit is also liable as a partner by holding out.