DR.

RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY

LUCKNOW
2016-2017

LAW OF CONTRACTS
FINAL DRAFT ON
EXPELLING A PARTNER: STATUS AND CAPACITY

SUBMITTED TO:
Dr. M. S.PASWAN
Associate Professor (Law)

SUBMITTED BY:
MONISH NAGAR
B.A..L.L.B. III Sem
Roll no. 84

ACKNOWLEDGEMENT

I would like to extend my sincere thanks to My teacher Mr. M. S.PASWAN for giving me this
wonderful opportunity to work on this project and for her able guidance and advice and Dean
(Academics), Professor C.M. Jariwala for their encouragement and Enthusiasm; My seniors
for sharing their valuable tips; And my classmates for their constant support.

TABLE OF CONTENTS
1. Introduction.3
2. List of Cases.4
3. Section 33 of the Partnership Act, 1932.5
Expulsion
Power must be conferred by contract:
Majority cannot expel partner without cogent reasons.
Notice by partner to retire is not expulsion
Expulsion of partner when amounts to dissolution of partnership
Resolution to retire partner
Invalid Expulsion
4.

LIST OF CASES
Cases
Clarke v Leach (1862) Beav 14.................................................................................................4
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Green v Howell (1910) 1 Ch D 495...........................................................................................6

Jiwan Singh v Lakshmi Chand AIR 1935 Lah 132....................................................................5
N. Satyanarayana Murthy v M. Vemkata Bala Krishnamurthy AIR 1989 AP 167....................5
Nem Das v Kunj Behari Oudh 424 : 110 IC 500 (DB)..............................................................5
Ramnarayan v Kashinath Jagnarain AIR 1949 Pat 53.............................................................6
Russel v Russel (1880) 14 Ch D 471..........................................................................................6
Wood v Wood (1874) 9 Ex 190...................................................................................................7

Books
1.

Desai, ST The Law of Partnership in India (7th Edn 2009 Lexis Nexis Butterworths)

p. 257.
2. Markanda PC The Law of Partnership ( Edn 2010 Lexis Nexis Butterworths) p. 363.

INTRODUCTION
According to Section 4 of Indian Partnership Act, 1932 a "Partnership" is the relation
between persons who have agreed to share the profits of a business carried on by all or any of
them acting for all.
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Persons who have entered into partnership with one another are called individually,
"partners" and collectively "a firm", and the name under which their business is carried on
is called the "firm-name".
Changes taking place in the personnel of a firm and continuation of its business as before,
without there being any actual dissolution between all the partners is not unusual. Under the
existing law, it has already been seen; a firm is not regarded as a legal entity and is not
deemed to have an existence distinct from the partners composing it, although the firms
name is allowed to be used for convenience in referring to the partners collectively. When
one partner retires or leaves the firm, the business is carried on in the same manner as it was
done earlier. Consequently the strict view of law of that on any change amongst the persons
comprising a partnership there is in fact a new partnership.

SECTION 33
EXPULSION OF PARTNER
(1) A partner may not be expelled from a firm by any majority of the partners, save in the
exercise in good faith or powers conferred by contract between the partners.
(2) The provisions of sub-sections (2), (3) and (4) of section 32 shall apply to an expelled
partner as if he were a retired partner.
Expulsion
The section is stated in negative form evidently to emphasis the general rule that majority of
partners do not ordinarily possess any right of expulsion. They cant expel unlessa. Such power is conferred by partners in the contract.
b. The power is exercised bona fide.

Power must be conferred by contract:

Agreement may provide for the exercise of the right of expulsion in case of various events. It
will be for the partners to decide for themselves whether such event has arisen as would
entitle them under the agreement to expel a partner. It is coming to such conclusion that good
faith has to be exercised.
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A right of expulsion conferred under the original agreement cannot be exercised in case of a
partnership at will which is deemed to exist where a partnership is continued after the
expiration of the term originally agreed upon.1
The section doesnt lay down as a condition precedent that partners who purport to exercise
this right should in all cases actually inform the partner sought to be expelled as to what is
exactly complained if against him and call upon him to defend himself.

Majority cannot expel partner without cogent reasons.

Although a partner has an option to retire, in the case of a partnership not entered in to for a
fixed period, he could not be made to retire or expelled by the other partners for reasons of
their own. 2
It is a question of law whether the alleged expulsion of a member affected by means of
communication operates by itself as dissolution of the partnership which is not for a fixed
term. Such notice of expulsion cannot have effect under the law.
Where under a partnership deed, a majority of the partners were authorized to remove a
partner from the firm if certain conditions are fulfilled, and expulsions of a certain number is
applied in a court, the law applicable to such a case is that the person charged should have
reasonable notice of the charges proposed to be brought against him, that he should have a
reasonable opportunity of defending himself and that the charges should be sustained in a
reasonable manner. 3

Notice by partner to retire is not expulsion

Under the partnership deed there was no express power conferred on the parties to expel a
member from the firm. One of the clauses of the contract provided a right to retirement in
1 Clarke v Leach (1862) Beav 14.
2 Jiwan Singh v Lakshmi Chand AIR 1935 Lah 132.
3 Nem Das v Kunj Behari Oudh 424 : 110 IC 500 (DB).
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case a partner was not satisfied with the functioning of the managing partner. When the
respondent issued notice for filing a suit for dissolution in terms of the clause, the respondent
was relieved as a partner. In a suit for dissolution it was held that the dissatisfaction regarding
the functioning of the managing partner was voiced by the respondent in such notice and it
therefore amounted to an expression of respondents intention to retire from partnership and it
did not amount to expulsion. 4

Expulsion of partner when amounts to dissolution of partnership

This section only applies where the power of expulsion has been reserved in the articles of
the partnership and where the power has been exercised in good faith by all the partners
whose concurrence might be necessary under the Articles of the partnership. It doesnt apply
to the case of the expulsion of a partner in direct breach of the contract of partnership. 5

Resolution to retire partner

In a deed of partnership there was a provision that in the partnership agreement in the event
of any one of the partner breach any duty as a partner, the other partners arent entitled to
expel them unless there is good faith. Subsequently, one of the partners had breach of their
partnership agreement.
It was held that in absence of mala fides, it was not a condition precedent to the validity of
the notice that the partner serving the notice should, before serving it, disclose to his partners
the causes of complaint against hi, or give him an opportunity of being heard in his defence,
and that the notice was valid.6
In LINDLEY ON PARTNERHSIP 7 it is stated:
4 N. Satyanarayana Murthy v M. Vemkata Bala Krishnamurthy AIR 1989 AP 167.
5 Ramnarayan v Kashinath Jagnarain AIR 1949 Pat 53.
6 Green v Howell (1910) 1 Ch D 495.
7 13th Edn, p. 445.
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Subject to the terms of the partnership agreement, where there is power to expel for
misconduct, the delinquent partner is not entitled to prior notice of the grounds of complaint
or to an opportunity of hearing for explaining his conduct, unless the other partners are
tribunal to decide whether an event has happened justifying the expulsion.
Although a partner has an option to retire in the case of a partnership not entered into for a
fixed period, he could not be made to retire or expelled by partners for reasons of their own.8
The case of Russel v Russel 9 is typical of the application of the rule of power exercise in
bona fide manner. Their partnership articles between A and B provided that if the business
should not be conducted to the satisfaction of B, he should have power to give notice to A to
determine partnership. B having given notice to A for the partnership to be determined, A
brought an action against B alleging various things, and particularly, that the power was used
to restrain B from announcing the dissolution. It was held that the power was exercisable by
B at how own will and pleasure.

Invalid Expulsion
An invalid expulsion does not put an end to the partnership even if its a partnership at will
and the partnership at will in law be deemed to continue as before.
It is has been held in an old English case that an invalid expulsion - that is one in
contravention of the rules stated in this section - being altogether inoperative will not entitle a
partner so dealt with to claim damages but that his only right to seek reinstatement. 10
No recent decision is available on the point but the case appears to lay down too wide a
proposition. It is reasonable that in a proper case a partner who has been wrongfully expelled
and has suffered loss should be entitled to damages.
Sub Section (2) - The effect of this section is to put an expelled partner on same footing as a
retired partner as regards his liabilities for existing and future debts of the firm.
8 Jiwan Singh v Lakshmi Chand AIR 1935 Lah 132.
9 Russel v Russel (1880) 14 Ch D 471.
10 Wood v Wood (1874) 9 Ex 190.
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It may also be observed that the expulsion of partners doesnt not under the Act necessarily
result in dissolution.