Answer in 150 words. Support your answer with relevant legal provisions and judicial pronouncements:
"An outgoing partner shares subsequent profits but not the liability for acts of the firm after his retirement." Elucidate the statement referring to relevant provisions of the Indian Partnership Act, 1932.
The statement accurately summarizes the position of an outgoing partner under the Indian Partnership Act, 1932 (IPA), regarding liability and profits post-retirement.
No Liability for Future Acts:
Section 32(3) of the IPA provides that a retiring partner is not liable for acts of the firm done after their retirement, provided public notice has been given. Without such notice, however, third parties unaware of the retirement may hold the outgoing partner liable under the principle of “holding out” (Section 28).
Right to Subsequent Profits:
Section 37 states that when a partner retires, dies, or otherwise ceases to be a partner, and the remaining partners continue the business with the firm’s property without a final account settlement, the outgoing partner (or their estate) is entitled either to:
- A share of profits attributable to the use of their share of the property, or
- Interest at 6% per annum on the value of their share.
Answered By:
Sakshi Negi
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