Question

(Provisions of the Indian Partnership Act, 1932). $A,B$ and $C$ are partners in a firm. They do not have a Partnership Deed.
(i) $A$, who has contributed more capital than other partners, demands interest on capital at $10\%p.a$. But $B$ and $C$ do not agree with this.
(ii) $B$ has devoted full time to run the business and demands a salary of $Rs.5,000p.m$. But $A$ and $C$ do not agree with him.
(iii) $C$ demands interest on the loan of $Rs.50,000$ advanced by him at the market rate of interest which is $12\%p.a$.
(iv) $A$ has drawn $Rs.10,000$ from the firm for personal use. $B$ and $C$ demand that interest should be charged @ $10\%$ per annum.
(v) Net Profit before taking into account any of the above claims amounted to $Rs.50,000$ at the end of the first year of the business. $A$ demands share of profit in the capital ratio.
How will the disputes be settled?

Answer 1

The partners do not have a Partnership Deed. Therefore, provisions of the Indian Partnership Act, 1932 will apply to settle the disputes:
(i) Interest on capital is not payable to any partner. Therefore, $A$ is not entitled to interest on the capital.
(ii) Remuneration is not payable to any partner. Therefore, $B$ is not entitled to any salary.
(iii) Interest on Partner's Loan is payable @ $6\%p.a$. Therefore, $C$ is to get interest $Rs.3,000(i.e.,Rs.50,000\times \frac{6}{100})$.
(iv) Interest on A's Drawings will not be charged.
(v) Profit after Interest on Loan, i.e., $Rs.47,000$ is to be distributed equally.