Cheated by business partner
My father has started a wholesale cloth store with my uncle and 2 more partners. So, in total the firm has 4 partners from the beginning. Among all 4, my uncle was intellectually and ac-accountably good and was taking care of the business accounts and all the paper work like managing transaction with banks, distributorship agreements, tax filing etc, from past 30 yrs. And rest all 3 partners, being less educative were taking lesser interest in business accounts and more in sales. However, it is strange to share this that all these partner taking their share from the firm as per there family needs and not actually as per the partnership basis. Now, all the 3 partners wants to closed the partnership deed, without going into the court and to take their remaining share out of it. However, this 4th partner is not the sharing the business accounts of the previous yrs. and is not giving the remaining share to them. However it is been observe that the major profit (remaining profit) has been absorb and investment by this 4 partner for its personal benefits of all 30 yrs and that constitute almost crs of Rupees.
Now, my father wants to close this partnership legally asap, and to get his fair share from it of all those yrs. Kindly give your valuable advice, how and where i should file a case against this. And how can I get the business accounts and expenses of the firm all those yrs. from this 4th partner.
As this firm involves a sales transaction on credit basis of 1 -6 months, and that can also be turned into a bad debts (directly or indirectly affecting the share of all the partners). So, by the time this dispute gets resolved in the court, can I get the permission from the court to stop all the Sales and Purchasing of the goods. And this will also help me to closing the partnership deed outside the court.
Asked 2 years ago in Business Law from Amravati, Maharashtra
1)what are the terms of partnership deed? is the firm registered?
2) there must be clause as to dissolution of partnership firm
3) is there a arbitration clause in the partnership deed?
4) if so disputes can be referred to arbitration even if firm is unregistered Hon'ble Supreme Court in Prabhu Shankar Jaiswal vs. Sheo Narain Jaiswal and others, 1996(11) SCC 225 and Prem Lata (Smt) and another vs. M/s Ishar Dass Chaman Lal and others, 1995(2) SCC 145 contended that dispute between partners of the firm can be referred to arbitration as per arbitration clause in the partnership deed even if the firm is unregistered one.
5)if there is no arbitration clause your father can under section 69 of indian partnership act file suit for dissolution of firm and for settlement of accounts
6) in said suit obtain an injunction restraining using the property of firm for further transactions
1. A partnership firm can be dissolved any time with the consent of all the partners. A partnership can be dissolved in accordance with the terms of the Partnership Deed or of the separate agreement.
2. A partner can dissolve it by giving written notice of dissolution to other partners duly signed by him. In those cases where a partner has given notice of dissolution at a time when dissolution will give him some advantage over the other partners, he may be held in the firm till the pending transactions are completed.
3. Your father can file a petition for dissolution of the partnership. The court may order for dissolution on any ground which court think is just, fair and equitable.
4. Your father can also seek court's directions to render the accounts to him. To stop further transactions your father can seek a stay order from the court.
5. Your father can initiate the process by issuing a lawyer's notice to the other partners.
First of all he should issue notice to other partners making his intention to dissolve the partnership or withdrawing from the partnership firm properly. If he finds no response, he may file a suit seeking his due share in the company . Before that he must obtain the account details as well profit and loss details of the business from the firm's auditor for all those years to ascertain the annual average gross and net profit.
The auditor will suggest the ways for recovery of his profits from the firm accordingly.
1. A partition suit claiming share of the firm can be filed,
2. Court may appoint a chartered accountant to draw the balance sheet and account for the money already taken by the partners periodically,
3. The paret5nership deed is required to be seen for winding up or dissolving the partnership firm,
4. The firm can then be dissolved as per the procedure/terms mentioned in the partnership deed.