A, B and C are partners in a firm. They do not have a Partnership Deed. At the end of the first year of the commencement of the firm, they have faced the following problems:
(a) A wants that interest on capital should be allowed to the partners but B and C do not agree.
(b) B wants that the partners should be allowed to draw salary but A and C do not agree.
(c) C wants that the loan given by him to the firm should bear interest @ 10% p.a. but A and B do not agree.
(d) A and B having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but C does not agree.
State how you will settle these disputes if the partners approach you for purpose.
Answers
Explanation:
In the given situation, C's claim is wrong.
When there is no partnership deed, a partner is still entitled to interest on any amount advanced by him in excess of his capital contribution. The rate of interest on loan should be 6%p.a not more than that and it should still be paid in case of loss in any year.
C should be paid interest on loan but not @10%p.a. He should be paid interest @6%p.a.
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Settlements of the disputes can be done in the following ways.
Explanation:
(a) A wants that interest on capital should be allowed to the partners but B and C do not agree.
According to the provisions of Partnership Act, 1932, interest on capital is not allowed and also there is no partnership agreement that is done among A, B and C. So, A’s request cannot be agreed.
(b) B wants that the partners should be allowed to draw salary but A and C do not agree.
Until and unless there is an agreement that allows that partners can draw the salary, it cannot be drawn.
(c) C wants that the loan given by him to the firm should bear interest @ 10% p.a. but A and B do not agree.
Interests on loans are allowed but it can be only at the interest rate of 6% per annum, in case the interest rate is not mentioned in the agreement.
(d) A and B having contributed larger amounts of capital, desire that the profits should be divided in the ratio of their capital contribution but C does not agree.
Profit is to be divided in equal ratio according to Partnership Act, unless there is an agreement made specifying the same.