Question

Jaspal and Rosy were partners with capital contribution ofRs.10,00,000 and Rs.5,00,000 respectively. They do not have a Partnership Deed. Jaspal wants that profits of the firm should be shared in their capital ratio. Rosy convinced Jaspal that profits should be shared equally. Explain how Rosy would have convinced Jaspal for sharing the profit equally.

Answer 1

In the absence of a partnership deed, the provisions of the Indian Partnership Act, 1932, apply. According to the Act, if there is no agreement regarding the ratio in which profits are to be shared, then profits (or losses) are to be shared equally among all the partners. Therefore, in this situation, Jaspal’s view of distribution of profits in the capital ratio is not acceptable, and Rosy must have convinced her stating the provisions contained in the Partnership Act, 1932.