Rahul and Kapil are partners in the firm M/s Saxena Marble House. Rahul purchased 100 shares of a reputed company in his name, but he made the payment from firm’s account. Rahul did not consent to Kapil before acquiring of shares. Referring to the provisions of the Indian Partnership Act 1932: (a) Whether the shares purchased by Rahul constitute the property of firm? (b) What would be your answer if Rahul debits himself in the accounts books of firm and became a debtor to the firm?

According to section 14 of the Indian Partnership Act, 1932, ‘property of the firm’ means ‘partnership assets’, ‘joint stock’, ‘common stock’ or ‘joint estate’ of the firm. The property of the firm includes: (i) all property, rights and interests which partners may have brought into the common stock as their contribution to the common business; (ii) all the property, rights and interest acquired or purchased by or for the firm, or for the purposes and in the course of the business of the firm; and (iii) Goodwill of the business. Further, if the contrary intension does not appear, the property acquired with the money of the firm is deemed to have been acquired for the firm. In the instant case, Rahul and Kapil are partners in the firm M/s Saxena Marble House. Without the consent of Kapil, Rahul purchased 100 shares of a reputed company in his name, but he made the payment from firm’s account. The answers are: (a) As shares were purchased from the money of firm, shares will be deemed to be the property of firm. (b) In case Rahul debits himself in the accounts books of firm as became a debtor of the firm, shares will not be deemed the property of the firm. They will be the personal property of Rahul.