Question

Sunil and Jatinder were partners in a firm. Their drawings during the year were Rs.1,00,000 and Rs.75,000 respectively. They do not have a Partnership Deed. Jatinder wanted that the firm should charge interest drawings @ 6% p.a. Sunil convinced Jatinder that interest cannot be charged on drawings to which Jatind agreed after discussion. What argument must have been put forward by Sunil that convinced Jatind

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 According to the Act, if there is no agreement regarding the interest on drawings withdrawn by the partners, then no interest on drawings is charged from any of the partners. Therefore, in this situation, Jatinder’s view of charging interest on drawings is not acceptable, and Sunil must have convinced him stating the provisions contained in the Partnership Act, 1932.