Minor As A Partner – Legal Provisions And Judicial View

1. Introduction

In India, matters relating to partnerships are governed by the Partnership Act, 1932. Partnership is a business organization where by two or more persons join together for jointly carrying on any business. Any two or more person can join together in order to create a Partnership. One of the essential ingredient of a partnership is that, there should be an agreement between the persons who want to be partners. This agreement has to be between two or more persons. Therefore the creation of partnership depends upon a contract between persons and hence these persons must be competent to enter into a contract. 

According to section 11 of the Indian Contract Act, 1872, persons who come under the category of minor, unsound mind, or disqualified from contracting by any law are not competent to enter into a contract. Therefore one belonging to the above mentioned category cannot become a partner. Thus a minor too cannot become a partner, but the business organization permits the minor to be admitted as a beneficiary of partnership. This article enables us to understand the role of a minor as beneficiary in the partnership. 

2. Role of minor under partnership

A minor who is admitted as a beneficiary also has certain rights and obligations. Section 30 of the Indian Partnership Act, 1932 deals with the position of a minor admitted to the benefits of partnership. 

According to section 30, a minor admitted to the benefits of partnership:

1. Should be a minor according to the law to which he is subject, may not be a partner of the firm, he should be admitted as a beneficiary with the consent of all the partners of the firm. 

2. Has a right to such share of the property and profits as agreed. Additionally he have the right to access and inspect and copy any of the accounts of the firm. 

3. Such a share is liable for the acts of the firm, but a minor will not be personally liable for such an act. 

4. Cannot sue the partners to claim their share unless they first leave the firm. Once they leave, their share is calculated using the rules in Section 48. If the minor files such a case, the other partners can choose to dissolve the firm, and then the court will treat the case as a dissolution suit.

5. After attaining majority within six months or when it comes to the knowledge that he had been a beneficiary of a partnership, such a person may give a public notice stating: 

a.)He has elected to become a partner; or

b.)He has elected not to become a partner. 

Additionally, if there is a failure to provide such a notice, he shall become the partner of the firm after the expiry of six months. 

6. When a minor becomes a beneficiary, the burden of proving the fact that the minor had no knowledge of such admission until a particular date, after the expiry of six months from attaining majority, will lie upon the person asserting the fact. 

Section 30(7) and (8) deals with the rights and liabilities of a minor on becoming a partner and not electing to become a partner. Section 30(9) deals with the application of doctrine of holding out on a minor who attained majority. 

Therefore partnership arises between persons who are competent to contract. A minor being incompetent to contract, his agreement being void, cannot become a partner in a firm. 

In the case law, Dharam Vir v. Jagan Nath [AIR 1968 Punj. 84], it was held that, if while creating partnership, a minor is made a full fledge partner in a partnership firm, the deed created would be invalid and the document cannot be enforced even through other partners. 

3. Minor as a beneficiary

As already mentioned section 30(1) provides that a minor may not be a partner in a firm, but with the consent of all the partners in the present, he may be admitted to the benifits of partnership. The most important element for a minor to become a beneficiary, is that of a valid partnership between those persons who are competent to contract. 

In the case law, Shriram v. Gouri Shankar [AIR 1961 Bom. 136], it was held by the court that, there can be no partnership with minors being the members. But at the same time a partnership between competent persons to contract must exist first, then only a minor can be admitted to its benefits. 

A guardian is capable of accepting benefits on behalf of the minor who has been admitted as a beneficiary in a partnership firm. 

4. Position of a minor during minority

The minor thus admitted as a beneficiary has a right to such share of the property as well as of the profits of the firm. As long as the minor is a beneficiary, he cannot enforce his rights on such shares through the court of law. He can sue at once, when he is severing his connection with the firm. 

According to section 12(d), a partner of a firm has a right to have access to and to inspect and copy any of the books of the firm whereas a minors right has been limited to account only, as it was considered undesirable to allow other than a real partner to have access to important documents of the firm. 

Under a partnership firm every partner is jointly and severally liable for all the acts of the firm. Not only that, their liability is unlimited and can extend to ones personal property. On the other hand, a minor is not personally liable for any such acts of the firm. It is only his shares that are liable and do not extend towards his personal property. 

5. Choice on attaining majority

According to section 30(5), at any time within six months, on attaining majority or by obtaining knowledge that he had been admitted as a beneficiary in a firm, he can either elect to become or not to become a partner in that firm. Such an option is exercised by a person, by giving notice under section 72 of the Act. If he fails to give such a notice by remaining silent, there is an assumption that he wants to be a partner and after the expiry of the mentioned six months, he shall become a partner of the firm. 

In the case law, The Commissioner of Income Tax, Mysore v. Shah Mohandas(AIR 1966 SC 15), the court held that, sometimes without the knowledge of the minor, their guardian may have accepted the admission of the minor as a beneficiary to the partnership and the minor may have no knowledge about this fact. According to section 30(6), the burden of proof is upon the person asserting the fact to prove that the minor had no knowledge of such admission after the expiry of the said six months. 

6. Position of a minor if he becomes a partner(Sec.30(7)) 

We came to understand that a minor who was admitted to the benifits in a firm becomes a partner when:

1. When he himself elects to become a partner on attaining majority; or

2. Fails to give the required notice by remaining silent within the respective time period. 

By becoming a partner, such a person becomes personally liable towards the creditors of the firm. Important point to be noted is that, this liability arise not from the date of attaining majority or from the date of him becoming a partner but retrospectively from the date of his admission to the benefits of partnership. This is different under English law. In the case law, Gode and Benninon v. Harrison 5 Bam. & Ald. 147 : 24 RR 307, the court held that liability does not function retrospectively from the date of becoming beneficiary, but is only starting from the date on which he attains majority. 

7. Position of a minor if he elects not to become a partner (Sec.30(8)) 

When a minor, on attaining majority, elects not to become a partner, his rights and liabilities continues to that of a minor up to the date of him giving public notice. His liability as regards to his share in the firm continues only up to the date of notice and after that neither his share in the firm is stable, nor there arises any questions relating to his personal property. 

8. Application of doctrine of holding out on minor's attaining majority (Sec.30(9)) 

According to this section, if after attaining majority, such a person represents or knowingly permits himself to be represented as a partner in the firm, there arise a liability on the ground of the doctrine of holding out. 

9. Conclusion 

It can be concluded that, although a minor cannot be a partner but can be admitted only to the benefits of partnership with the consent of all partners. During minority, the minor can receive profits and inspect accounts, and though his share is liable, he cannot be personally liable for the firm’s acts. After attaining majority, the minor may choose by public notice, whether to become a partner or not. If he elects to be a partner, he becomes personally liable. Thus, the law protects the minor while allowing him the option to either enter or not to enter the partnership on attaining majority.

Here are some questions and answers on the topic:

1. What are the rights available to a minor admitted to the benefits of a partnership under the Indian Partnership Act, 1932?

A minor cannot be a partner but may be admitted to the benefits of a partnership under Section 30 of the Indian Partnership Act, 1932, and has certain rights. A minor has the right to receive an agreed share of the firm’s profits and property. They can inspect and copy the accounts of the firm, though not other books. They can sue the partners for their share only after they sever their connection with the firm. When they become major, they have six months to decide whether to become a partner and must give public notice of their choice. Their liability is limited, as only their share in the firm is liable and not their personal property. They are also entitled to their share of profits and property if the firm is dissolved or if they withdraw.

2. What is the difference between the rights of a minor and the rights of a partner in a partnership firm?

A minor admitted to the benefits of a partnership has limited rights, as they can only receive a share of the firm’s profits, inspect the accounts, and claim their share upon severing their connection, and their liability is restricted only to their share in the firm. In contrast, a partner has full rights, including the right to take part in the business, access all books, share profits and losses, participate in decision-making, bind the firm through their acts, and their liability is unlimited and extends to their personal property.

3. What option is available to a minor on attaining majority under the Indian Partnership Act, 1932?

When a minor admitted to the benefits of a partnership attains majority, they have the option to either become a partner or refuse to become one. They must make this choice within six months and give a public notice; if they fail to do so, they are treated as a partner by default.

4. How does the doctrine of holding out apply to a minor on attaining majority under the Indian Partnership Act, 1932?

Under Section 30(9), if a minor after attaining majority represents himself, or knowingly allows himself to be represented, as a partner, he becomes liable as a partner on the basis of holding out. This means that even if he has not formally elected to become a partner, his conduct or consent to being treated as a partner makes him personally liable for the firm’s acts.

5. When does a minor become a partner in a firm under the Indian Partnership Act, 1932?

A minor becomes a partner in a firm only after attaining majority and giving a public notice within six months electing to become a partner; if no notice is given within this period, the minor is deemed to have become a partner by default from the date they attained majority.

Disclaimer: The content shared in this blog is intended solely for general informational and educational purposes. It provides only a basic understanding of the subject and should not be considered as professional legal advice. For specific guidance or in-depth legal assistance, readers are strongly advised to consult a qualified legal professional.