Indian Partnership Act, 1932 MCQs

Sample Indian Partnership Act, 1932 MCQs with answers

10 of the 100 questions, with the answer and explanation. Open a question to try it yourself first.

1. Q1. Under Section 4 of the Indian Partnership Act, 1932, partnership is the relation between persons who have agreed to share the profits of a business carried on by:

   1. (A) all of them only, acting jointly
   2. (B) a manager appointed by all of them
   3. (C) all or any of them acting for all
   4. (D) any one of them acting for himself
   Show answer and explanation

   Answer: (C) all or any of them acting for all

   Section 4 defines partnership as 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. The words 'acting for all' express mutual agency. The option 'all of them only' is tempting, but the Act allows the business to be carried on by any one partner, provided he acts on behalf of all.

   Provision: Section 4, Indian Partnership Act, 1932

2. Q2. The Indian Partnership Act, 1932 came into force on 1 October 1932. Which one of its provisions came into force a year later, on 1 October 1933?

   1. (A) Section 4, which defines partnership
   2. (B) Section 39, which defines dissolution of a firm
   3. (C) Section 69, which deals with the effect of non-registration
   4. (D) Section 30, which deals with minors admitted to the benefits of partnership
   Show answer and explanation

   Answer: (C) Section 69, which deals with the effect of non-registration

   Section 1(3) brings the Act into force on 1 October 1932, except Section 69, which came into force on 1 October 1933. Section 69 lays down the disabilities of an unregistered firm. Section 4 is a tempting choice because it is the core definition, but it came into force along with the rest of the Act in 1932.

   Provision: Section 1(3), Indian Partnership Act, 1932

3. Q3. Under Section 25 of the Indian Partnership Act, 1932, a partner is liable for all acts of the firm done while he is a partner:

   1. (A) jointly only, so that all the partners must be sued together
   2. (B) severally only, in proportion to his share of profits
   3. (C) jointly with all the other partners and also severally
   4. (D) only up to the amount of capital he has contributed
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   Answer: (C) jointly with all the other partners and also severally

   Section 25 makes every partner liable jointly with all the other partners and also severally for all acts of the firm done while he is a partner. A creditor may therefore recover the whole debt from any one partner. Liability limited to capital is tempting for students who think of companies or LLPs, but a partner in a firm has unlimited liability.

   Provision: Section 25, Indian Partnership Act, 1932

4. Q4. In a partnership at will, how may a partner dissolve the firm under the Indian Partnership Act, 1932?

   1. (A) Only by filing a suit for dissolution in court
   2. (B) Only with the written consent of all the other partners
   3. (C) By an oral statement made to any one of the other partners
   4. (D) By giving notice in writing to all the other partners of the intention to dissolve the firm
   Show answer and explanation

   Answer: (D) By giving notice in writing to all the other partners of the intention to dissolve the firm

   Section 43 provides that where the partnership is at will, any partner may dissolve the firm by giving notice in writing to all the other partners of his intention to dissolve it. The consent of the others is not needed. The option requiring written consent of all partners is tempting, but that describes dissolution by agreement under Section 40, not dissolution by notice.

   Provision: Section 43, Indian Partnership Act, 1932

5. Q5. In settling the accounts of a dissolved firm, unless the partners have agreed otherwise, losses including any deficiency of capital are to be paid first out of:

   1. (A) the profits of the firm
   2. (B) the capital of the partners
   3. (C) the advances made by the partners
   4. (D) the personal assets of the partners, in their profit-sharing ratio
   Show answer and explanation

   Answer: (A) the profits of the firm

   Section 48(a) provides that losses, including deficiencies of capital, are paid first out of profits, next out of capital and lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits. Capital is the tempting choice, but it is used only after the profits are exhausted. The partners pay personally only as the last step.

   Provision: Section 48(a), Indian Partnership Act, 1932

6. Q6. Which group of Sections of the Indian Partnership Act, 1932 deals with the ways a partner may leave a firm, along with the rights and liabilities of such an outgoing partner?

   1. (A) Sections 18 to 30
   2. (B) Sections 32 to 38
   3. (C) Sections 39 to 55
   4. (D) Sections 56 to 71
   Show answer and explanation

   Answer: (B) Sections 32 to 38

   Sections 32 to 38 deal with retirement, expulsion, insolvency and death of a partner, and with the rights and liabilities of outgoing partners, such as the right to carry on a competing business. Sections 39 to 55 are the tempting choice because they also deal with partners parting ways, but they govern dissolution of the firm itself, not a partner leaving a firm that may continue.

   Provision: Sections 32 to 38, Indian Partnership Act, 1932

7. Q7. Under Section 37 of the Indian Partnership Act, 1932, where the continuing partners carry on the business with the firm's property without settling accounts with an outgoing partner, the outgoing partner may claim either a share of the profits or interest at which rate per annum?

   1. (A) 9%
   2. (B) 12%
   3. (C) 6%
   4. (D) 18%
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   Answer: (C) 6%

   Section 37 gives the outgoing partner, or the estate of a deceased partner, an option to claim either the share of profits earned with his or her share of the firm's property or interest at 6% per annum on the amount of that share, unless there is a contract to the contrary. This right lasts until the accounts are finally settled. The 12% figure is a common guess, but it does not appear in Section 37.

   Provision: Section 37, Indian Partnership Act, 1932

8. Q8. Which of the following correctly describes the registration of a partnership firm under the Indian Partnership Act, 1932?

   1. (A) Registration is compulsory within 30 days of the firm starting its business.
   2. (B) Registration is optional, but an unregistered firm faces certain legal limitations.
   3. (C) Registration is compulsory, and an unregistered firm is an illegal association.
   4. (D) Registration is required only when the firm has more than 10 partners.
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   Answer: (B) Registration is optional, but an unregistered firm faces certain legal limitations.

   The Act does not make registration compulsory, so a firm can run its business without being registered. However, Section 69 places disabilities on an unregistered firm and its partners, mainly the inability to enforce contractual rights through a suit. Calling an unregistered firm illegal is the common mistake, because non-registration only takes away certain rights to sue and does not make the partnership unlawful.

   Provision: Sections 58 and 69, Indian Partnership Act, 1932

9. Q9. Under Section 30 of the Indian Partnership Act, 1932, a minor may be admitted to the benefits of partnership in a firm:

   1. (A) with the consent of a majority of the partners
   2. (B) only with the prior permission of a court
   3. (C) with the consent of all the partners for the time being
   4. (D) as a full partner, if the minor's guardian signs the partnership deed
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   Answer: (C) with the consent of all the partners for the time being

   Section 30(1) says a minor cannot be a partner, but with the consent of all the partners for the time being, he or she may be admitted to the benefits of partnership. The agreement is made through the minor's guardian, but that does not turn the minor into a full partner. Majority consent is not enough, and no court permission is required.

   Provision: Section 30(1), Indian Partnership Act, 1932

10. Q10. Which section of the Indian Partnership Act, 1932 provides that the unrepealed provisions of the Indian Contract Act, 1872 continue to apply to partnerships, except where they are inconsistent with the express provisions of the Partnership Act?

    1. (A) Section 4
    2. (B) Section 5
    3. (C) Section 3
    4. (D) Section 6
    Show answer and explanation

    Answer: (C) Section 3

    Section 3 keeps the unrepealed provisions of the Indian Contract Act, 1872 applicable to partnerships, so general rules on offer, acceptance and capacity still apply where the Partnership Act is silent, but they give way where they are inconsistent with its express provisions. Section 4 is the tempting choice because it is the definition section, but it only defines 'partnership', 'partner', 'firm' and 'firm-name'.

    Provision: Section 3, Indian Partnership Act, 1932