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Legal Aspects of Banking :: Partnerships


1.Partnership is not a legal entity.  But  it is a group of persons associated  for a specific objective.

02.Two partnership firms can not form a Partnership firm.

03.Two companies can form partnership firm.

04.Max for Banking activity        – 10
     Max for Non-banking activity – 20

          As per section 11 of Company act.

05. If number of members exceeds 10/20 it is an illegal association.

06.Partnership firms are to be registered with Registrar of Firms.

07.An unregistered firm can not sue it’s debtors but it can be sued.

08.A minor can be admitted for the membership of the firm, but he/she entitles only for the benefits of the farmer.  Within 6 months after attaining the majority, the minor should declare his/her willingness to be a partner.  If he does not declare, he/she automatically becomes a partner of the said firm.

09.On the death of partner, operation in CC a/c to be stopped

rationale :  a] As per sec. 42 of Partnership act, once the partner dies,
                      the firm is automatically dissolved.
                 b] to avoid application of clayton’s rule in case of debit
                    balance vide sec. 59 to 61 if Indian Contract act.
                 c] to protect the interest of the Bank.       

10. Partnership letter is necessary while opening an account.

rationale :  a] partners declare in the latter that they are jointly and
                     severally liable
                  b] the undertake to inform the Bank if there is any change
                       in the constitution of the firm.

11. If the same documents are signed by different parties on different dates, which date will be date of the document?
If several parties to a document sign it on different dates, the practice is to reckon the last of such dates as the date of the document.  However, the limitation period, as far as a partnership firm is concerned, starts from the earliest date, i.e., the date on which one of the partners first signed the document on behalf of the firm (IBA Bulletin, Feb 1990).

12.Can a partner delegate others for firm’s operations ?

Ans : Every partner is an accredited agent of the firm as per sec 18 of Partnership act.
He being a delegate (of the firm and that of other partners) can not further delegate as per sec 190 of Indian Contract act.

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