Q: Answer the problem as regards to retirement of partner in partnership firm ?

Problem Statement: A partner of a partnership firm got retired from the firm on 1.4.1982. The firm was continuing to carry on its business. The firm took the loan on 1.3.1985. It was proved that the retiring partner neither represented himself as a partner nor allowed to be represented that he was a partner in the firm as on 1.3.1985. Can he be liable for the loan taken by the firm on 1.3.1985? Explain by highlighting the provisions of the Indian Partnership Act.

Solution: The problem presented is under Section 28, 32 of the Partnership Act. Section 28 mentions about holding the representation of partner.

According to section 32(3) of partnership act, notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a partner.

This problem is conformity with the case Tower Cabinet Co Ltd V. Instagram.

Since the partner retired from the firm on 1.4.1982 and the loan was taken by the firm on 1.3.1985, which was after his retirement, the provisions of section 32(3) would be applicable in this problem and according to section 32(3), a partner retiring from the firm must give public notice of his retirement. If the public notice was not given to other partner, then he will be liable for the acts done by the firm even after his retirement, but section 32(3) also provides a proviso that the retired partner is not liable to any other person who deals without knowing that he was a partner.

In the present problem it is proved that the partner will only be liable to the person who represents or allows to be the partner. In the present problem, the partner neither represented nor gave permission to be partner after his retirement. Hence he will not be liable for the loan.

The conclusion of the problem  follows the  decision of Tower Cabinet Co. v. Ingram (1949).

Hence in the present problem, the partner will not be liable for the debt incurred by the firm.

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