Fraud in partnership
Querist :
Anonymous
(Querist) 24 March 2011
This query is : Resolved
A, B and C entered into partnership to do business. The firm was not registered. All A, B and C remained dormant partners, while their respective husbands D, E and F, conducted the business on their behalf. Husbands were being paid salary and were acting as employees of the partnership firm.
After about a year, E and F transferred funds of the firm in the personal account of B and using the clients, vendors and infrastructure of the partnership firm, have set up a new firm for doing the same business. Just A and her husband D were kept in dark.
A and D are taking civil action for dissolution and rendition of accounts against B, C, E and F.
What action can A and D take against B, C, E and F under criminal law. Criminal breach of trust, cheating, etc.?
Please detail what sections of IPC may be included.
Parveen Kr. Aggarwal
(Expert) 24 March 2011
Instead of filing a civil suit for dissolution first serve notice of dissolution (if the partnership is at will) and then file a suit for rendition of accounts and recovery of the amount.
You can certainly launch prosecution for misappropriation.
Querist :
Anonymous
(Querist) 25 March 2011
Thanks Mr. Aggarwal.
In this case, the partnership agreement said that the firm could not be dissolved for 2 years. And the firm is only a year old. Can we still serve a dissolution notice?
Parveen Kr. Aggarwal
(Expert) 26 March 2011
If the partnership is for certain fixed term, it cannot be dissolved earlier unless and untill there is another clause in the partnership agreement permitting its earlier dissolution.
As you have stated that the firm is unregistered, bar of section 69 of the Indian Partnership Act, 1932 will apply in filing of suit before dissolution. However, after dissolution you can sue taking benefit of section 69(3) of the Act.
