POSITION OF A MINOR ADMITTED TO THE BENEFITS OF PARTNERSHIP

According to section 4 and 5 of the Partnership Act, relation of partnership arises from the contract and not for the status of parties.

Therefore, a minor being incompetent to contract may not be a partner.

However, according to section 30(1) of the partnership act he can be admitted to the benefits of partnership if all the partners of such firm agree to do so.

Provision of admitting a minor to the benefits presupposes the existence of valid partnership between competent persons before his admission to such firm.

A VALID PARTNERSHIP MUST EXIST BEFORE A MINOR COULD BE ADMITTED TO THE BENEFITS OF IT.

LACHHMI NARAIN V. BENI RAM

In above case two persons entered partnership in 1900 under the style Beni Ram Hotilal. Hotilal died in 1920 and thereafter Beni Ram continued the business under the old name and style with the partnership funds. Hotilal's minor son (the plaintiff) alleged that after his father's death he was admitted to the benefits of partnership.

It was held that the plaintiff (minor) could not be admitted to the benefits of partnership as no partnership existed after the death of Hotilal.

Moreover, the plaintiff being a minor could not enter a contract with Beni Ram to form partnership.

MINOR'S POSITION DURING MINORITY

If a minor is admitted to the benefits of partnership in accordance with section 30(1), he becomes entitled, in accordance with section 30(2), to such share in property and profits of the firm as may be agreed upon and he shall have right to access to the accounts of the firm with right to inspect and have copy thereof.

In this matter, his position is different from a partner of the firm.

A partner has a right to have access to and to inspect and copy any of the books of the firm whereas a minor's right has been limited to accounts only.

In case of partnership, every partner is jointly and severally liable for all acts of the firm. Moreover, his liability is unlimited and can extend to his personal property.

As regards the liability of minor, section 30(3) provides that his liability for the acts of the firm is limited to his share, and he is not personally liable for any such act.

RIGHT TO SUE THE PARTNERS FOR ACCOUNT OR PAYMENT OF HIS SHARE

Section 30(4) restricts his right to sue the partners for account or payment of his share of property or profits of the firm except in one condition when such minor severs his connection with such firm.

OPTION ON ATTAINING MAJORITY

In this regard, section 30(5) provides that at any time within six months form the date of obtaining majority or knowing about his being admitted to the benefits of the partnership firm, whichever date is later, such person will have to decide to be or not to be the partner through public notice under section 72 of the Act.

If he remains silent and fails to give such a notice, there is a presumption that he wants to be a partner and on the expiry of the said six months, he shall become a partner in the firm.

For the purpose of exercise of option under Section 30(5), it is necessary that the firm must be in existence when the minor attains the age of majority; If the firm has already been dissolved before the minor attained majority, the question of exercise of option does not arise, and such a minor admitted to the benefits of the partnership cannot be presumed to have become a partner on the expiry of a period of six months from the date of his attaining the majority.

SHIVAGOUDA V. CHANDRAKANT

This may be explained by referring to the decision of the Supreme Court in Shivagouda v. Chandrakant. In this case in a partnership firm which consisted of A & B, Chandrakant, who was a minor, was admitted to the benefits of the partnership.

The firm had dealings with the appellants and it became indebted to them to the extent of Rs. 1,72,484. After that, i.e., on April 18, 1951, the partnership was dissolved.

Subsequently, Chandrakant attained majority but did not exercise an option under Section 30(5) declaring that he did not want to become a partner.

The appellants having failed to recover the dues from A and B as they had become insolvent, brought an action against Chandrakant contending that since Chandrakant had failed to exercise an option within the period of 6 months of his attaining the majority as stipulated in Section 30(5), he had become a partner and, therefore, he should also be adjudicated insolvent for the debts of the firm.

It was, however, held by the Supreme Court that Section 30 of the Act does not apply to Chandrakant as he had attained majority only after the firm had already been dissolved.

He is not a partner of the firm, and therefore, he cannot be adjudicated insolvent for the acts of insolvency committed by the partners of the firm, i.e., A & B.

Sometimes, it may happen that a minor might have been admitted to benefits of a firm without his knowledge and minor continues ignorant of such fact even after the expiry of six months after six months of attaining majority.

In this regard, section 30(6) provides that burden of proving the fact of such ignorance is upon the person who asserts so.

MINOR'S POSITION IF HE BECOMES A PARTNER [SECTION 30(7)]

When a minor becomes partner either by electing to be so under section 30(5) or due to his failure in giving notice indicating his choice or election regarding becoming or not becoming the partner, his rights and liabilities vis a vis other partners continue to be same. His share in property and profits of firm also continue to be same as was before becoming so partner.

Towards the creditors, he becomes personally liable as other partners and that too retrospectively from the date of his admission to the benefits of firm.

MINOR'S POSITION IF HE ELECTS NOT TO BECOME A PARTNER [SECTION 30(8)]

When he elects not to become a partner, his rights and liabilities continue to be the same as that of a minor up to the date of his giving public notice. His liability as regards his share in the firm continues only up to the date of the notice. 

Thereafter, neither his share in the firm is liable, nor there arises any question of his personal liability.

APPLICATION OF DOCTRINE OF HOLDING OUT ON MINOR'S ATTAINING MAJORITY [SECTION 30(9)]

According to Section 30(9), if after attaining majority, he represents or knowingly permits himself to be represented as a partner in the firm, his liability on the ground of holding out can still be there.