DAMODARAM SANJIVAYYA NATIONAL

LAW UNIVERSITY
VISAKHAPATNAM, A.P., INDIA

R OLE OF MINORS IN THE PARTNERSHIP

CONTRACTS- II

Mr. P. JOGI NAIDU B.SC., MHRM.,

LLM ASSISTANT PROFESSOR

ASHUTOSH SHARMA

2019086

3rd SEM

1
 ACKNOWLEDGEMENT

I have taken efforts in this project. However, it would not have been possible without the kind
support and help of many individuals. I would like to extend my sincere thanks to all of them.

I am highly indebted to Mr. P. Jogi Naidu Sir for her guidance and constant supervision as
well as for providing necessary information regarding the project & also for their support in
completing the project.
I would like to express my gratitude towards my family for their kind co-operation and
encouragement which help me in completion of this project.
My thanks and appreciations also go to my friends in developing the project and people who
have willingly helped me out with their abilities.

Ashutosh Sharma
2019086

2
 TABLE OF CONTENTS

 INTRODUCTION..........................................................................................................4
 MINORS – ADMITTED ONLY TO BENEFITS.........................................................4
 RIGHTS AND LIABILITIES OF A MINOR...............................................................6
Rights of a Minor Partner...................................................................................................7
Liabilities of a Minor Partner..............................................................................................7
 POSITION OF MINOR ON ATTAINING MAJORITY..............................................8
 LANDMARK JUDGEMENTS...................................................................................10
1. MOHORI BIBEE V. DHARMODAS GHOSE...........................................................10
2. S.C MANDAL V. KRISHNADHAN..........................................................................12
3. HARDUTT RAY GAJADHAR RAM VS COMMISSIONER OF INCOME-TAX. .14
4. THE COMMISSIONER OF INCOME-TAX, V. M/S. DWARKADAS KHETAN &
CO 15
5. BANKA MAL LAJJA RAM & CO. VS COMMISSIONER OF INCOME-TAX.....17
6. SHIVAGOUDA RAVJI PATIL AND OTHERS VS CHANDRAKANT
NEELKANTH SEDALGE.....................................................................................................18
7. BHOGILAL LAHERCHAND VS COMMISSIONER OF INCOME-TAX...............19
 CONCLUSION............................................................................................................21
 BIBLIOGRAPHY........................................................................................................22
 INTRODUCTION

A minor is a person who hasn’t yet attained the age of majority according to the Indian
Majority Act of 1875.1 Section 32 of the Indian Majority Act states that a person who is
domiciled in India will attain majority at the age of eighteen.

Section 30 of the Indian Partnership Act3 governs the admittance of a minor into a
partnership. This section deals with the rights and liabilities of a minor who is admitted to a
partnership and is entitledtothebenefitsofapartnership. Adeeper readingoftheprovision,
specifically sub-section (1)4 of the provision makes it very clear that a minor can’t be a full-
fledged partner in a partnership. But with the consent of all the partners, a minor can be
admitted to the benefits of a partnership.

MINORS – ADMITTED ONLY TO BENEFITS

The general principle which has been laid down in Section 11 5 of the Indian Contract Act,
1872, states that a person has to attain the age of majority and should be of sound mind and
not disqualified to enter into a contract to be a competent party. The Indian Partnership Act,
1932 was drafted by a Special Committee. Before the enactment of this statute, the provisions
relating to partnerships was enshrined in the Indian Contract Act itself. While drafting the
Act, the Special Committee felt that no major changes wererequired inthe Partnership Act,
and theybelieved that there was no reason to deviate from the principle of incapability of a
minor to enter into a contract as providedby Section 11 ofthe Contract Act. Followingthis,
the Committeedid notallowminors to become a partner in a partnership, although they
allowed a minor to be admitted to the benefits of a partnership.6 In the judicial
pronouncement of S.C. Mandal v. Krishnadhan,7 It was

1
http://admis.hp.nic.in/himpol/Citizen/LawLib/C0141.html.
2
Indian Majority Act, § 3.
3
https://indiankanoon.org/doc/1921150/.
4
Id.
5
http://comtax.up.nic.in/Miscellaneous%20Act/the-indian-contract-act-1872.pdf.
6
http://www.legalindia.com/minority-and-partnership/.
7
(1922) 49 Cal 560,570.
observed that under Section 4 of the Indian Partnership Act, a firm means a group of person
who has entered into a contract of partnership among themselves and reading it with Section
11 of the Indian Contract Act, it can be interpreted that a minor cannot be a part of the
contract of partnership. A minor can only be admitted to the benefits of a partnership, and
that partnership has to exist independently. Also, there cannot be a contract between two
minors. In simple words, there should be a partnership between two major partners before a
minor can be admitted to its benefits.

In the case of H.R.G Ram v. Commissioner of Income Tax,8 It was held by the High Court of
Allahabad that any partnership deed which divides the obligations and rights between the
major and minor partners equally will be invalid as it will be in contravention of Section 30
of the Partnership Act because in such a case not only the benefits are given to the minor, but
liabilities are also being imposed upon the minor. There was some confusion regarding this
propositionoflaw as insomecases, different high
Courtsofthecountryopinedthatevenifaminor is made a full-fledged partner in a partnership
firm, the partnership deed is to be interpreted in a liberal manner, and the obligations of the
minor will be limited tothe extent provided in Section 30 of the Partnership Act.

But in the landmark case of Commissioner of Income Tax v. D Khetan and Co.9The Apex
Court made the legal stand clear on this issue by stating that where a minor is made a full-
fledged partner in the firm, the firm could not be registered by the Income Tax Department.
In case the Income Tax Department do register such a partnership firm, a new contract is to
be made where the minor is admitted only to the benefits of the firm, and the original contract
will be rendered invalid by registration of the new contract. Therefore, the proposition of the
law is very clear. The partnership deed has to make it specifically clear that the minor is
admitted only to the benefits of the firm and is not personally liable for the losses.

In the judicial pronounce of Banka Mal Lajja Ram & Co. v. Commissioner of Income Tax,
Delhi,10 It was held by the Court that even if the other partners consent, a minor still can’t
become a full-fledged partner in a firm through his or her guardian. In the case of CIT v.
Kedarmall Keshardeo,11 it was held by the Court that a contract deed is valid when a guardian

8
[1950] 18 ITR 106 (All).
9
AIR 1961 SC 680.
10
AIR 1953 Punj 270 (DB).
11
AIR 1968 Assam 68.
enters into a partnership on behalf of the minor, provided the minor is not made liable for the
losses of the partnership, and the Guardian still had the right of being the guardian of the
minor when the contract was entered into. Also, the income of a minor from a partnership
will not be considered for the purpose of income tax.

RIGHTS AND LIABILITIES OF A MINOR

Sub-section (2)12 of section 30 of the Partnership Act states that a minor is entitled to share of
profits and the property of the firm which may have decided at the time the minor was
admitted to the benefits of the partnership. Under this provision, a minor also has the right to
access and inspects the accounts of the firm. But this right is limited to the access and
inspection only of the accounts of the firm and not any other document of the firm. Under
sub-section (3) of the provision, it is stated that the minor is liable to the extent of his share in
the partnership and cannot be made personally liable for the losses of the firm. In the case of
S.C Mandal v. Ashutosh Ghose,13 It was held by the Court that the creditors of the firm can
only recover the amount from a minor to the extent of his share in the firm, but they can’t sue
the minor personally. The full-fledged partners do not enjoy this benefit as they can be made
personally liable. In the case of S.R Patil v. C.N. Sedalge,14 It was opined by the Court that a
minor who has been admitted to the benefits of a partnership can’t be declared insolvent even
if the other partners are declared as insolvent.

Sub-section (4) of the provision states that the minor can sue other partners to get the benefits
of the partnership, but this right to sue is limited by the provision. The minor gets the right to
sue other partners to recover the benefits only if the minor sever all ties with partnership firm.
This provision further states that in the case the minor sever all ties with the firm, valuation of
his share is to be done by section 4815 of the Act, as far as possible.

To summarise;

12
http://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf.
13
AIR 1915 Cal 482.
14
AIR 1965 SC 212.
15
Indian Partnership Act, § 48.
 Rights of a Minor Partner

i. A minor partner will obviously have the right to his share of the profits of the firm. But
the minor partner is not liable for any losses beyond his interests in the firm. So a minor
partner’s personal assets cannot be liquidated to pay the firms liabilities.

ii. He can also like any other partner inspect the books of accounts of the firm. He can
demand a copy of the books as well.

iii. If necessary he can sue any or all of the other partners for his share of the profits or benefits.

iv. A minor partner on attaining majority has the right to become a partner of the firm. He
has six months from attaining majority to decide if he will execute this right. Whether he
decides to become a partner or not he must give public notice about the same.

Liabilities of a Minor Partner

i. A minor cannot be held personally liable for the losses of the firm. And if the firm
declares insolvency the minor’s share is kept with the Official Receiver

ii. After turning 18 the minor partner can choose to become a partner of the firm. But he
may choose to not become a partner. In this case, the minor partner has to give a public
notice about this decision. And the notice has to be given within 6 months of gaining
majority. If such a notice is not given even after 6 months then the minor partner will
become liable for all acts done by the other partners till the date of such notice.

iii. Should the minor partner choose to become a partnerhe will be liable to all the third
parties for the acts done by any and all partners since he was admitted to the benefits of
the partnership.

iv. If he becomes a full-time partner he will be treated as a normal partner and have all the
liabilities of one. His share in the profits and propertyof the firm will remain the same as
it was when he was a minor partner.
 POSITION OF MINOR ON ATTAINING MAJORITY

Under sub-section (5), the minor has an option to either become a full-fledged partner of the
firm or severe his connections with the same. He may, within six months of attaining eighteen
years of age, choose to become or not, become a partner and signify the same by way of a
public notice as described under Section 72. Failing to do the same, results in his ispo facto
becoming a partner in the firm.16The minor need not issue a public notice in case he wants to
continue being a partner because he would anyway, by default, become a partner on the
expiry of six months.17 The minor does continue to enjoy the rights, which he had enjoyed as
a minor, after he turns into a major till he decides to either continue or repudiate the
partnership or the expiry of the period six months, whichever is earlier.18 If the minor did not
have the knowledge that he was entitled to benefits of the partnership, he may signify his will
to repudiate the said contract within six months of his attaining knowledge of the fact that of
he was entitled to benefits of the partnership in question. Under sub-section (6), the burden of
proving that the minor did not have knowledge that he was in fact entitled to the benefits of
partnership rests with the party asserting the same. If the person asserting so is the minor
himself, then he would have the onus to prove the same in accordance with Section 106 19 and
if it is someone else then Section 10120 and Section 10321 will throw the onus on him.22 Under
sub-section (7), clause (a), the minor, who has either chosen to continue as a full-fledged
partner post attainment of majority or fails to signify his will to repudiate under sub-section
(5), becomes a full-fledged partner and such a minor can be held liable for not only the debts
incurred by the partnership after his becoming a partner, but also the ones which had been
incurred ever since he was entitled to benefits of the partnership. Thus, the minor in a way
becomes retrospectively liable.

16
Desai 231.
17
Singh 458.
18
HK Saharay (‘Saharay’), Indian Partnership and Sales of Goods Acts 97 (2000).
19
The Indian Evidence Act, § 106.
20
The Indian Evidence Act, § 101.
21
The Indian Evidence Act, § 103.
22
Singh 458.
This is a major departure from English Law, wherein the creditors are in a less favourable
position.23 In English Law, the minor would be liable only for debts incurred by the firm
since he attained majority.24

A minor’s share in the profits, on his joining the firm as a full-fledged partner post attainment
of majority, remains the same as was set out in the deed.25 This is in line with the view taken
in Bhogilal v. Commissioner of Income-tax26 (sub-section (7), clause (b)) that there is no
break in the continuity of a partnership in the case where the minor elects to become a partner
and hence a new partnership does not come into existence.

In Shivgouda Rajiv Patil v. Chandrakant Neelkanth Sedalge 27 the question arose as to

whether the minor partner (Chandrakant) who had attained majority subsequent to
commitment of acts of insolvency by the other partners could be held to be personally liable
for the debts of the firm. The Supreme Court held that it was legally impossible for the Court
to hold the Chandrakant liable for the debts of a partnership that had already been dissolved
before he attained majority.28 This establishes that a minor who was entitled to benefits of a
partnership cannot be held personally liable for the debts of the firm when it had already been
dissolved before he attained majority, i.e., attained the capacity to be a party to losses of the
firm along with profits.

Under sub-section (8), the minor who elects not to be a partner his share in the firm will be
liable to the extent of losses and debts incurred until he gave public notice about his intention
to sever his connections with the firm.29 He might thereafter bring a suit to enforce this quasi-
contract like contract to receive his share. 30 Sub-section (9) states that the two sub-sections
which immediately precede sub-section (9) do not in any way affect the rights of the party to

23
Harmohan v. Sudarshan (1920) 25 CWN 847 as cited in Desai 232.
24
Godde v. Harrison (1821) 5 B & Ald. 147, p. 157 as cited in Desai 232.
25
Imadadali Tayabali v. C.I.T., Poona 1972 Mah LJ 285.
26
AIR 1956 Bom 411 as cited in Desai 231.
27
AIR 1965 SC 212.
28
Id.
29
S.D. Singh 459
30
Id.
whom the minor after attaining majority might have misrepresented himself as a partner. He
will be liable for “holding out”.31

LANDMARK JUDGEMENTS

1. MOHORI BIBEE V. DHARMODAS GHOSE

Facts:

Dharmodas (plaintiff) has mortgaged his property in favour of Brahmo Dutt (defendant)
when he was a minor. Brahmo Dutt was a money lender in Calcutta. He took a loan of Rs
20,000 from him. In order to take the loan, he mortgaged his house as security. The
transaction was done when Brahmo Dutt was not there and it was done by his attorney
named, Kedar Nath, who had the knowledge of the plaintiff is a minor. The actual amount of
loan given was less than Rs. 20,000.

On September 10, 1895, Dharmodasalongwithhismotherfiledasuit against Brahmo

Duttstating that the mortgage that was executed by Dharmodas was commenced when he was
a minor. Further, contended that the contract with a minor is void and such a contract should
be rescinded and revoked. When this petition was inprocess, Brahmo Dutthad diedand
thefurther proceedings were done by his executor’s.

Issue:

1. What is the nature of a minor’s agreement?

2. Whether the deed was void under section 2, 10(5), 11(6) of the Indian Contract Act,
1872 or not?
3. Whether the mortgaged commenced was avoidable or not?

Legal Provision:

1. Any contract with a minor or an infant is neither valid nor voidable but is void ab-
initio (void from beginning)

31
Desai 233.
 2. Section 64[7] of Indian Contract Act,1872 is only applicable in the case, where the
parties entering in contact are competent to make such contract and is not applied to
cases where there is no contract made at all.
3. The legal acts done by an representative or any knowledge of an agent means that
such acts done or having knowledge of anything is of his principal.

Reasoning:

The Privy Council strictly defined that any sought of contract or agreement with a minor or
with any infant shall be null and void. All contacts with the minors will be void ab-initio.
Majority Act, 1875 outlined the definition of a minor, according to such act, any person who
is below the age of 18 years or has not completed the age of 18 years shall not be competent
to create or enter into any sought of contact or agreement.

Any sought of contract inwhich a minor is party tocontract or whether he/she is involved in it
shall be void. This perception is correct because minor or infant comes in the category of
such people who cannot give there free consent along with the reason that they are not in a
situation where they can think in a manner in which a prudent or an ordinary person could do
it. An agreement is a deal where free an equal consent of all parties are given but in case of a
minor there consent can be dominated by major ones as a result of which , it leads to the
violation of one of the condition to form a contract, i.e. free consent (a consent is said to be
free when it is not caused by Coercion, Undue Influence, Fraud, Miss representation and
Mistake).

The court also through its verdict has propounded that, a contact with an infant shall be
declared null and void it means that it is neither valid nor voidable. Minors contract shall be
avoided and stopped because it sometimes lead to the harmful social, economic and legal
effects on the lives and conditions of the minors. Any such person who commits such offence
shall be strictly punished by court of law, either through imprisonment or with a fine or with
both according to the ambit of the offence committed by the major person.

Judgement:

The judgement given was that the minors have no eligibility to enter into a contract under
Section 11 of the contract act. Section 11 of the Indian Contract Act, 1872 says that “Every
person is competent to contract who is of the age of majority according to the law to which
he/she is subjected to. Hence, any contract with a minor is void ab initio. It is said that all the
requirements under Section 11 have to be fulfilled in order to constitute a valid contract.
Further, it was held that the contract with the minor is void. The minor has no capacity to
contract and the mortgage was invalid. The minor cannot be compelled to repay the amount
advanced to him because he is not bound by any sort of promise made by him under the
contract. Also, the law of estoppels is not used for the minor.

2. S.C MANDAL V. KRISHNADHAN

Facts:

The defendant (Sanyasi Charan) and his brothers were the five sons of Bhuban Mohan
Mandal, a Hindu governed by the Dayabhaga school of law. He died in November, 1899, and
at that time his two younger sons were minors. Nil Ratan, the eldest brother and the Karta of
the family, was appointed their guardian.

Bhuban Mohan had two businesses, one for fuel wood at Munshigunj, and the other for rice
and otherarticles at Kali-bazar. Eachdevolved as an
ancestralbusinessonthefivesonsandwascarried on by Nil Ratan as the Karta, assisted by his
adult brothers. After the father's death a new business in rice was started by Nil Ratan at
Orphangunj and carried on behalf of the joint family. For the same, the brothers borrowed Rs.
19,800 from the plaintiff and later it appeared that the family karbars failed and the other
sons of Bhuban Mohan have been declared insolvents.

Issue:

Whether the Defendant is liable for the debts sought to be recovered? If so, what would be the
extent of his liability.

Legal Provision:

Sec. 27 of the Guardians and Wards Act (VIII of 1890) provides that “a guardian of the
property of a ward is bound to deal therewith as carefully as a man of ordinary prudence
would deal with it if it were his own; and subject to the provisions of this chapter, he may do
all acts which are reasonable and proper for the realisation, protection or benefit of the
property.”

The Judicial Committee itself referring to secs. 247 and 248 (Contract Act) in support of the
proposition that a minor is incapable of entering into a contract, observed: “Again under secs.
247 and 248, although a person under majority may be admitted to the benefits of a
partnership,
he cannot be made personally liable for any of its obligations although he may on attaining
majority accept those obligations if he think fit to do so.”

Reasoning:

It is to be borne in mind that the Plaintiff's case in the present suit was that all the karbars
were ancestral. Even now an enquiry is necessary and accounts will have to be gone into in
order to determinewhethersomeofthepropertiesallottedtothe Defendantunderthepartition
decreewere allotted to him as his share of the Orphangunge karbar or as part of his share in
the ancestral properties generally. The Defendant was a minor even when the written
statement was filed in the present suit by his guardian and he accepted that written statement
shortly after attaining majority. The question whether the Defendant had knowledge of all the
facts and retained the benefit with knowledge that it was on account of the Orphangunge
karbar, was not gone into in the Court below, as the question was not specifically raised in
the pleadings. It would be inequitable to hold that the Defendant made himself personally
liable for all the obligations of the firm merely because he retained some property acquired
out of it without finding whether he elected to affirm the partnership with knowledge of the
facts. In all these circumstances we think that for the ends of justice, an enquiry ought to be
made as to whether the Defendant retained the properties with the knowledge that it was on
account of the, Orphangunge karbar, and not on account of the ancestral karbars and
properties.

Judgement:

In the judgement the court direct a general account to be taken by the Court below with
respect to the karbars and the properties left by Bhuban Mohan. The Court will determine on
taking such accounts whether any property was allotted to the Defendant as his share of the
Orphangunge karbar or as part of his share of the ancestral properties and properties acquired
out of the funds of the ancestral karbars generally. In the first case any such property
received on behalf of the Defendant will be liable for the claim of the Plaintiffs. In the latter
case the Plaintiffs' claim will have, to be dismissed. If the finding on the above point is in the
Plaintiffs' favour the Court below will have also to find whether the Defendant on his
attaining the age of majority retained any such property with full knowledge of the facts and
with the knowledge that such property was received by his guardian on his behalf as his share
of the Orphangunge karbar, in which event only the Defendant will be liable personally for
the Plaintiffs' claim.
 3. HARDUTT RAY GAJADHAR RAM VS COMMISSIONER OF INCOME-TAX

Facts:

Gajadhar Ram and Benarsi Lal were cousins. Gajadhar Ram had two sons, Sundar Mal and
Jagdish Prasad. Sundar Mal is dead and his widow had adopted Krishna Murari, son of
Jagdish Prasad. Gajadhar Ram, Benarsi Lal, Jagdish Prasad and Krishna Murari were
members of a joint Hindu family, and on the 15th September, 1932, there was a partition
between them and a deed of partition was executed. On the 15th October, 1932, they
purported to enter into a partnership, each of them being given a four annas share.

The document failed to take into account the fact that Krishna Murari was a minor and the
document purports to be an agreement between the minor and the three adult persons to enter
into a partnership with equal rights and obligations. One partner having died and this
application having been made only by Gajadhar Ram, Benarsi Lal and Jagdish Prasad,
Krishna Murari being dead.

Issue:

Whether on the true construction of the deed of partnership, dated 15th September, 1932,
Krishna Murari was admitted as a partner of the firm or was he admitted to the benefits of
partnership?

Legal Provision:

There can be no doubt that the minor was incapable of entering into such a contract, the
contract on his behalf is void subject to such benefits that he may be entitled to get under
Section 30 of the Indian Partnership Act.

Reasoning:

On thefacts statedabovethat Krishna Murariwasdead,

thatthelegalrepresentativehadnotsigned the application, that the application did not state that
one of the partners had died and his legal representative had been admitted into the
partnership nor was any signature obtained of the legal representative who was not a minor
and a false certificate was given that the constitution of the firm had not been altered, the
answer can only be in the negative.
Judgement:

It was held by the Court that any partnership deed which divides the obligations and rights
between the major and minor partners equally will be invalid as it will be in contravention of
Section 30 of the Partnership Act because in such a case not only the benefits are given to the
minor, but liabilities are also being imposed upon the minor.

4. THE COMMISSIONER OF INCOME-TAX, V. M/S. DWARKADAS KHETAN

& CO

Facts:

Prior to January 1, 1945, there was a firm called Dwarkadas Khetan & Co. On that date, the
firm ceased to exist, because the other partners had previously withdrawn, and it came to be
the sole proprietary concern of Dwarkadas Khetan. On February 12, 1946, Dwarkadas Khetan
obtained the selling agency of Seksaria Cotton Mills, Ltd. On March 27, 1946, he entered
intoa partnership, with three others by an instrument of partnership executed that day. Those
three others were Viswanath Purumul, Govindram Khetan and Kantilal Kasherdeo.
Dwarkadas Khetan's share in the partnership was 7 annas in the rupee, while the remaining 9
annas' share was divided equally among the three others. Though Kantilal Kasherdeo was a
minor, he was admitted as a full partner and notmerely tothe benefits ofthe partner- ship,
Kantilal Kasherdeo was alsoa signatory, though immediately after his signature there was the
signature of one Kasherdeo Rungta, the natural guardian of the minor. In the instrument,
Kantilal Kasherdeo was described as a full partner entitled
notonlytoashareintheprofitsbutalsoliabletobearallthelossesincludinglossofcapital. It was
also provided that all the four partners were to attend to the business, and if consent was
needed, all the partners including the minor had to give their consent in writing. The minor
was also entitled to manage the affairs of the firm, including inspection of the account books,
and was given the right to vote, if a decision on votes had to be taken. In short, no distinction
was made between the adult partners and the minor, and to all intents and purposes, the minor
was a full partner, even though under the partnership law he could only be admitted to the
benefits of the partnership and not as a partner.
Issues:

Whether the partnership should have been taken to be a valid partnership consisting of the
adult partners.

Legal Provision:

Registration of the firm was sought under s. 26A of the Indian Income-tax Act. The Income-
tax Officer refused to accord registration on the ground that a minor had been admitted as a
partner contrary to law, and that the deed could not, therefore, be registered.

""Partner" includes any person who being a minor has been admitted to the benefits of
partnership;", and observed that in view of this definition and the fact that a minor could be
admitted to the benefits of partnership under s. 30, the document was not invalid, but must be
read as giving to the minor the rights laid down by the Partnership Act.

Reasoning:

The Apex Courtmadethelegalstandclearonthisissuebystatingthatwhereaminorismadeafull-

fledged partner in the firm, the firm could not be registered by the Income Tax Department.
In case the Income Tax Department doregistersuchapartnershipfirm, anew contract is
tobemadewhere the minor is admitted only to the benefits of the firm, and the original
contract will be rendered invalid by registration of the new contract. Therefore, the
proposition of the law is very clear. The partnership deed has to make it specifically clear that
the minor is admitted only to the benefits of the firm and is not personally liable for the
losses.

Judgement:

The minor was included as a partner did not make the partnership as between the two adult
partners invalid, and that the minor must be deemed to have been admitted to the benefits of
the partnership by the two adults.
 5. BANKA MAL LAJJA RAM & CO. VS COMMISSIONER OF INCOME-TAX

Facts:

In 1937 a partnership was entered into of which the partners were five individuals and ten
units who were different Hindu Undivided Families.

Sohan Lal who was a partner in this firm died and a new partnership was entered into on 28-
6- 1945 and one of the partners was Sohan Lal's son Satish Kumar who is described at No. 6
in the partnership deed as "Satish Kumar minor son of Lala Sohan Lal B. Sc., by his guardian
and mother Shrimati Shakun-tala Devi residing at Ferozepore City".

Terms of the partnership deed make no distinction between the liabilities of the minor partner
Satish Kumar and the other partners. According to this partnership then all the partners
including Satish Kumar were jointly responsible for the loss and entitled to the profits of this
business.

Issue:

"Whether a minor son can, according to law, enter into a partnership through his mother the
natural guardian, even with the consent of the other partners?"

Legal Provision:

Under Section 30, Partnership Act a minor cannot be a full-fledged partner in a partnership
firm and therefore the contract entered into making a minor a partner would be invalid and
cannot be registered under Section 26A, Income-tax Act.

Reasoning:

A widow on the death of her husband was not the karta of an undivided Hindu family and
consequently an agreement of partnership purported to have been entered into by a widow on
behalf of her minor sons and as representing the joint family would be invalid.

Judgement:

A minor cannot enter into a partnership through his guardian, even when the other partners are
consenting.
 6. SHIVAGOUDA RAVJI PATIL AND OTHERS VS CHANDRAKANT
NEELKANTH SEDALGE

Facts:

A partnership firm was being run wherein one of the partners was a minor (respondent 1) and
was admitted to the benefits of the partnership. The partnership was dissolved and
subsequently the minor partner became a major. However, he did not exercise his option to
become a partner under Section 30(5) of the Indian Partnership Act. When the appellants
claimed their dues, the respondents were unable to pay them and so all three of them were
sued by the appellants for adjudicating them for being insolvent.

Issue:

Is respondent 1, who did not exercise his right to be a partner for the firm, a partner under
Section 30(5) of the Indian Partnership Act?

Legal Provision:

Under the provisions of the Provincial Insolvency Act, a person can only be adjudicated
insolvent if he is a debtor and has committed an act of insolvency as defined in the Act: see
ss. 6 and 9.

Under s. 30(1) of the Partnership Act a minor cannot become a partner of a firm but he may
be admitted to the benefits of a partnership. Under sub-ss. (2) and (3) thereof he will be
entitled only to have a right to such share of the properties and of the profits of the firm as
may be agreed upon, but he has no personal liability for any acts of the firm, though his share
is liable for the same.

Reasoning:

At any time within six months of his attaining majority, or of his obtaining knowledge that he
had been admitted to the benefits of partnership, whichever date is later, such person may
give public notice that he has elected to become or that he has elected not to become a partner
in the firm, and such notice shall determine his position as regards the firm
Judgement:

Under ordinary circumstances a respondent 1 would be a partner of the firm. However, in this
case he had attained majority only after the firm had been dissolved. A minor after attaining
majority cannot elect to be a partner of a firm that does not exist. Hence Section 30 of the
Partnership Act does not apply to him.

7. BHOGILAL LAHERCHAND VS COMMISSIONER OF INCOME-TAX

Facts:

Bhogilal had three sons Pratap, Arvind and Mahesh. Bhogilal started a partnership with his
three sons under a deed of partnership dated 14-4-1943. At that date Pratap was a major and
Arvind & Mahesh were minors and therefore Arvind and Mahesh were admitted to the
benefits of the partnership.

Arvind attained majority on 22-8-1950. He elected to continue to remain a partner of this firm
and a freshpartnershipdeedwas executedbetween Bhogilal thefatherand Pratap, Arvind and
Mahesh on 28-8-1950. Arvind died on, 31-8-1950 i.e., after three days of this execution. The
accounts of the firm were closed at Diwali every year. The Income-tax Officer calculated the
proportionate profits coming to the share of Arvind upto August 22, when he attained
majority, and included the sum in the assessment of the assessee for that Samvat Year of Rs.
2,49,459.

The sum constituted the income of Arvind as a minor and therefore, the assessee, who was
the father of Arvind, should pay tax on the amount under Section 16(3)32 of IT Act, 1922,
notwithstanding the fact that, had the partnership resulted in loss, Arvind as a partner would
have debited to him his share of the loss.

Issue:

1. Whether the father was liable to pay tax on the income of his minor son?
2. Whether A could ever have claimed from the partnership the sum?

32
Section 16(3) of the Indian Income-tax Act, 1922 says income in the eye of the law is looked upon
as income of the father. Although a certain amount is not the income of the minor still you must look
upon it as his income and make the father pay tax on that income.
Legal Provision:

If a minor son attainingmajority elects to continue as a partner, the partnership does not come
to an end, the partner-ship continues, and the minor having become a partner he is entitled to
his profits as computed at theendoftheyearregulatedbythepartnershipdeed. On
theotherhand, if theminor elects not to be a partner, he severs all his connection with the
partnership and he becomes entitled to whatever amount is due to him at the date when he
makes the election not to become a partner.

Reasoning:

(For Issue 1) ncomemayaccrueto an assesseewithouttheactualreceiptofthesame. If

theassessee acquires a right to receive the income, the income can be said to have accrued to
him though it may be received later on its being ascertained. Unless and until there is created
in favour of the assessee a debt due by somebody it cannot be said that he has acquired a right
to receive the income or that income has accrued to him. In this case, no debt was created in
favour of Arvind, nor the sum was a debt due at any time by the partnership to Arvind.
Therefore Arvind had not acquired any right to receivetheincome as on 22
andhencethesumcouldnotbeincludedintheassessee’s totalincome.

(For Issue 2) As soon as the partnership deed was executed (28 Aug) and Arvind elected to
continue as a partner, the only right that Arvindhadwas to receive his sharein the profits,
when the accounts were made up at Diwali and not before. He had no right to receive the
profits that may have arisen when he attained majority (22 Aug). A partnership may come to
an end by operation of law; a partner may die or a partner may retire, in which case the law
provides that accounts would have to be made up on that particular day, irrespective of the
provision in the partnership deed for making up the accounts in the ordinary course(Diwali).
In case of minor, the accounts would have to be made up on that particular day on which the
minor elects not to be a partner. Arvind (or his estate) acquired the right to receive the sum
only on 31, when the debts and accounts were to be ascertained, because of his death.

Judgement:

The sum represented profits of the partnership to which A as a minor was entitled and
therefore it can be included for IT assessment.
 CONCLUSION

This project deals with the rights and liabilities of a minor with respect to a partnership, under
S.30 of the Indian Contract Act. A minor, while not being a full-fledged partner in any case,
can only avail the benefits of such partnership via consent of all partners, not all of which can
be minors. The position of law stands – minor partners are not personally liable for the losses
suffered by the firm. A guardian may contract on the minor’s behalf to enter the partnership –
as long as it is not detriment to the minor’s interest. Furthermore, a minor’s income under a
partnership cannot be brought under the head of earning income and hence cannot be
considered for purposes of income tax. After attaining majority, the minor can choose to stay
with the partnership and subsequently become liable for losses, or severe relations altogether.
 BIBLIOGRAPHY

S.NO. STATUTES
1. Indian Contract Act, 1872
2. Indian Majority Act, 1875
3. Indian Partnership Act, 1932

S.NO. LINKS
1. blog.ipleaders.in/rights-minor-partnership/
2. toppr.com/guides/business-laws/the-indian-partnership-act/minors-admitted-
to-benefits-of-partnership/
3. sol.du.ac.in/mod/book/view.php?id=1569&chapterid=1558

4. lawctopus.com/academike/minors-and-partnership-rights/

S.NO. LIST OF CASES

1. Banka Mal Lajja Ram & Co. v. Commissioner of Income Tax, Delhi
2. Bhogilal v. Commissioner of Income-tax
3. CIT v. Kedarmall Keshardeo
4. Commissioner of Income Tax v. D Khetan and Co
5. H.R.G Ram v. Commissioner of Income Tax
6. Mohori Bibee V. Dharmodas Ghose
7. S.C Mandal v. Ashutosh Ghose
8. S.C. Mandal v. Krishnadhan
9. S.R Patil v. C.N. Sedalge
10. Shivgouda Rajiv Patil v. Chandrakant Neelkanth Sedalge
S.NO. RESEARCH DATABASES
1. www.scconline.com
2. www.manupatra.com
3. www.lexisnexis.com
4. www.legitquest.com