Ramesh is a supplier of fruits and vegetables in Azadpur Mandi, Delhi. To expand its business, he invited Suresh and Mahesh (his college friends) to invest in his business. Suresh and Mahesh were agreed but they put a condition that they will share profit in the ratio of 33.33% each or Interest @ 12% p.a. on the capital (which they will bring) whichever is higher but they will not share losses if occurred in any year. Ramesh agreed for this association and made an agreement for partnership. Advise, whether this association will be treated as partnership according to the provisions of the Indian Partnership Act, 1932? (ii) Manak was working as a construction contractor from several years. He engaged Roop Sing a labour and material contractor for procurement of raw material and labour for construction site. All the expenses pertaining to raw material, Labour wages will be borne by Manak. Manak agreed to give Roop Singh 5% of the contract amount for procurement. Whether this arrangement will be termed as partnership? Explain according to provisions of the Indian Partnership Act, 1932? (iii) Shantanu was running business of ABC Travel Agency from several years. He purchased 10 cars amounting to ` 100 lakh for the purpose of running them on hire. He borrowed ` 50 lakhs for this purpose from Shankar. Shankar proposed that he will take 25% of profit share. He has nothing to do with business. Shantanu agreed for this proposal. After some time, Shankar told his friends that he is partner in ABC Travel Agency. Shantanu denied the fact. He contended that he is sharing in profit only, not a partner in his travel agency. Advice with reference to the provisions of the Indian Partnership Act, 1932 whether this arrangement between the Shantanu and Shankar will be treated as partnership?

(i) Whether the Association will be treated as Partnership? Section 4 of the Indian Partnership Act, 1932 states that "Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The sharing of profits of a business is an essential feature of partnership. There can be no partnership where only one of the partners is entitled to the whole of the profits of the business. Partners must agree to share the profits in any manner they choose. But an agreement to share losses is not an essential requirement. It is open to one or more partners to agree to share all the losses. Yes, it is a case of partnership. The association between the partners, Ramesh and Suresh will be treated as partnership according to the provisions of the Indian Partnership Act, 1932, as there was a partnership agreement according to which they decided to share in profit only. Alternate Answer to 3(a)(i) No, it is not a case of partnership due to lack of the mutual agency which is conclusive evidence of partnership. Mutual agency includes that all partners are jointly and severally liable for the partnership's debts and obligations, even if they didn't directly participate in the specific transaction. (ii) As per the Indian Partnership Act, 1932, "Partnership" is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all (mutual agency). In the gives case, there was no agreement to share profit of the business. Manak was incurring all the expenses relating to the construction and Roop Singh is merely acting as an agent of Manak as he was receiving 5% of the contract value. Therefore, this arrangement will not be termed as partnership. (iii) According to Section 6 of the Indian Partnership Act, 1932 in determining whether a group of persons is or is not a partnership firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. For determining the existence of partnership, it must be proved that: (a) There was an agreement between all the partners concerned; (b) The agreement was to share the profits of a business and (c) The business was carried on by all or any of them acting for all. Sharing of profit, which is prima facie evidence, exists but mutual agency among Shantanu and Shankar, which is an essential element, does not exist here as Shantanu borrowed ` 50 Lakhs for his business from Shankar for which will take 25% of profit share. In the absence of mutual agency, the most essential element of partnership, the arrangement between Shantanu and Shankar cannot be treated as a partnership under the Indian Partnership Act, 1932.