Indian Partnership Act - Withdrawal by partner
Querist :
Anonymous
(Querist) 25 July 2011
This query is : Resolved
In a partnership firm at will, which is running in profits and had no loan payable to any one and has got sufficient funds with the firm.
In this firm, a partner has withdrawn certain amount from firm for his personal use and has purchased properties for his personal purposes. The property purchased is of no use to the firm for its business. Another partner sue the parnter and asked for the share in the property as it is purchased from funds of the firm.
Court held that since the partner has withdrawn amount from the firm and purchased a property and now has got debit balance in firm. Since he has not repaid the amount to the firm. it is concluded that it is used from funds of the firm and therefore becomes property of the firm.
Can any one give me any judgement of the court which specifically negate this as per prov. of sec. 14 of the Indian Partnership Act 1932 on the basis that it is not used for the purposes of the firm and intention of the partner was not to purchase it for the firm.
Also to be noted that the partner has shown it as personal withdrawal in his books. Books of accounts of the firm are finalised every year and no other partner has questioned the withdrawal.
R.Ramachandran
(Expert) 25 July 2011
Rather than any legal position, your case would entirely depend upon the facts.
Such facts might have already been pleaded.
Therefore, unless the contents of the suit, your written statement, and the final decision of the court is made known, it will be very difficult to give any view.
Prima facie, unless as and when the amount was withdrawn for personal purposes, the said withdrawal has been shown as personal withdrawals in the Accounts, it will be very difficult to hold that the property was not purchased for the partnership. Whether or not the Partnership is in requirement of the property is different. Similarly, whether or not the partner had intention to purchase the property for himself or for partnership is also secondary.
The main fact will largely hinge upon the accounting treatment given when the money was withdrawn by the partner. Whether there was annual account closure during the period. What was the reaction of the partner concerned to the accounting entries etc. Currently, we are not aware of any such details and as such are handicapped in giving any views.
