Ans.
PARTNERSHIP PROPERTY
(SECS. 14 & 15)
What constitutes a partnership property depends upon the
agreement between the partners? It is open to the partners to agree among
themselves as to what is to be treated as the property of the firm and what is
to be separate property of one or more partners. They can convert by mutual
agreement, partnership property into separate property of an individual partner
and vice versa. In the absence of any such agreement, the property of the firm
according section 14, means—
(i) property originally brought into the common stock of the
firm by the partners,
(ii) property acquired in the course of the business with
money belonging to the firm;
(iii) the goodwill of the firm.
Unless the contrary intention appears, property and
rights and interests in property acquired with money belonging to the firm are
deemed to have been acquired for the firm.
Application of the property of the firm (sec. 15)
Subject to contract between partners, the property of the
firm shall be held and used by the partners exclusively for the purposes of the
business.
Goodwill:
1. Goodwill is not defined in the Partnership Act.
Goodwill may be described as the advantage which is acquired by a firm from the
connection it has built up with its customers and the reputation it has gained.
2. “The goodwill of business is the whole advantage of
the reputation and connection formed with customers together with the
circumstances whether of habit or otherwise, which tend to make such connection
permanent. It represents in connection with any business of business product
the value of attraction to customers which the name & reputation
possesses.”
3. Goodwill is part of the property of the firm (Sec. 14).
Sale of goodwill after
dissolution (sec. 55)
The rules relating to sale of goodwill upon dissolution
of a firm are as follows:
1. In settling the accounts of a firm after dissolution,
the goodwill shall, subject to contract between the partners be included in the
assets, and it may be sold either separate or along with other property of the
firm. [Sec. 55(1)]
2. The rights of the buyer and seller of the goodwill are
as follows:
(a) Seller’s rights: After the sale of goodwill, the
seller i.e., the partner of the dissolved firm,
(a) may carry on a business competing with that of the
buyer of goodwill, and
(b) may advertise such business. [Sec. 55(2)].
But subject to agreement between him and the buyer, the
seller of goodwill that is, partners of the dissolved firm may not:
(i) use the firm name,
(ii) represent themselves as carrying on the business of
the old firm, and
(iii) solicit the customers of the old firm. [Sec. 55(2)]
(b) Buyer’s rights: On the purchase of goodwill the buyer
gets the (I) right to carry on the same business under the old name and (II) to
represent himself in continuing the business and solicit former customers of
the business and restrain the sellers of the goodwill from doing so.
3. But any partner of the dissolved firm may make an
agreement with the buyer that such partner will not carry on a business similar
to that of the firm within a specified period or within specified local limits,
provided the restrictions imposed are reasonable. Sec. 55(3)
