Question

(Provisions of the Indian Partnership Act, 1932). $X$ and $Y$ are partners in a firm. They do not have Partnership Deed. What shall be the position in the following cases?
(i) $X$ devotes more time than $Y$ in the business. $X$ claims that he should get a salary of $Rs.6,000$ per month for it.
(ii) $Y$ has provided a capital of $Rs.50,000$ whereas $X$ has provided $Rs.5,000$ only as capital. $X$, however, has advanced $Rs.10,000$ as loan to the firm. What interest, if any, will be given to $X$ and $Y$?
(iii) $X$ wants to introduce his son $Z$ into their business. $Y$ objects to his proposal.
(iv) $Y$ wants that profit should be distributed in the ratio of the capitals but $X$ wants that it should be distributed equally.

Answer 1

In the absence of Partnership Deed, provisions of the Indian Partnership Act, 1932 shall apply to settle the disputes:
(i) Salary is not payable to any partner. Therefore, $X$ is not entitled to any salary.
(ii) Interest on capital is not payable to any partner in the absence of Partnership Deed. Therefore, $X$ and $Y$ will not get interest on their capitals. Interest on loan is payable @ $6\%p.a.$ Thus, $X$ will get interest on loan @ $6\%p.a$.
(iii) A person cannot be introduced as partner without the consent of all the partners. Therefore, $Z$ cannot be admitted into partnership because $Y$ objects to it.
(iv) Profits shall be shared equally between $X$ and $Y$ after deducting interest on loan of $X$ @ $6\%$ p.a. on $Rs.10,000$.