What are the retiring partner’s rights and obligations?

Section 32 of Indian Partnership Act, 1932 talks about the retirement of the partner and clause
3 of the section says that retiring partner is liable for the acts of the firm done before his
retirement. But a retiring partner may not be liable for the debts incurred before his retirement
if an agreement is reached between the third parties and the remaining partners of the firm
discharging the retiring partner from all liabilities. After retirement the retiring partner shall
be liable unless a public notice of his retirement is given. No such notice is required in case
of retirement of a sleeping or dormant partner..

Section 36 and 37 of Indian Partnership Act, 1932 talks about of rights of retiring partner i.e.
the retiring partner would have an right to carry on competing business with that of firm and
can advertise about it, until and unless he uses the name of the firm, represent himself as
carrying on the business of the firm or solicit the custom of persons who were dealing with
the firm before he ceased to be a partner. Further Section 37 talks about the right of outgoing
partner to be entitled to such share of profits made since he ceased to be partner as may be
attributable to use of his share of the property of firm in case the continuing partners carry on
the business of the firm with the property of firm without any final settlement of accounts as
between them and the outgoing partner.

What are the firm’s rights & obligations?

The partnership deed contains the mutual rights, duties and obligations of the partners and in
certain cases the Partnership Act also makes a mandatory provision as regards to the rights
and obligations of partners. Moreover, when there is no deed or the deed is silent on any
point; rights and obligations as provided in the Partnership Act shall apply.

Rights of a Partner

 Right of the partner to take part in the day-to-day management of the firm.
 Right to be consulted and heard while taking any decision regarding the business.
 Right of access to books of accounts and call for the copy of the same.
 Right to share the profits equally or as agreed upon by the partners.
 Right to get interest on capital contributed by the partners to the firm.
 Right to avail interest on advances paid by the partners for business purpose.
  Right to be indemnified in respect of payment made or liabilities incurred or for
protecting the firm from losses.
 Right to the use of partnership property exclusively for partnership business only not
himself.
 Right as agent of the firm and implied authority to bind the firm for any act done in
carrying the business.
 Right to prevent admission of new partners/expulsion of existing partners.
 Right to continue unless and otherwise he himself cease to become partner.
 Right to retire with the consent of other partners and according to the terms-and
conditions of deed.
 Right of outgoing partner/legal heirs of deceased partner.

Duties of a Partner:

 Every partner should carry on the business to the greatest common advantage. He
must perform his duties honestly and diligently.
 A partner is not entitled to get remuneration for the conduct of business, unless
otherwise it is specially mentioned in the partnership deed.
 A partner must indemnify the firm for loss suffered because of his fraudulent conduct
or wilful neglect.
 A partner is bound to keep and render true and correct accounts of the business.
 A partner cannot carry on a competing business. If he carries on such business he shall
account for and pay to the firm all profits made by him in that business.
 A partner is bound to act within the scope of his authority.
 No partner can make a secret profit of the partnership business by way of
commission, etc. If he does so, he must return the money to the firm.

What are the payouts from the firm to the partner and whether such payout can be
agreed to be paid on a future date / in instalments? If yes, whether interest is payable on
said future payments?

According to Section 13 (a) of The Indian Partnership Act, 1932; a partner is not entitled to
receive any kind remuneration for taking part in the conduct of the business. But in practice,
the working partners are generally paid remuneration as per agreement, so also commission
in some case. Thereby, any payout to from the firm to the partner has to be done according to
their separate agreement and such payout can be agreed to be paid on a future date.

Moreover, clause (d) of section 13 specifies that a partner, who makes any payment or
advance beyond the amount of capital he has agreed to subscribe is entitled to interest thereon
at the rate of 6%, per annum.