MCQ on Indian Partnership Act 1932

MCQs on Indian Partnership Act, 1932

Part 1: Introduction to the Act

1. Which section of the Indian Partnership Act, 1932 defines a partnership?
   a) Section 3
   b) Section 4
   c) Section 5
   d) Section 6
   Answer: b) Section 4
   Explanation: Section 4 of the Indian Partnership Act, 1932 defines partnership as the relationship between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
2. The maximum number of partners in a partnership firm as per the Companies Act, 2013 is:
   a) 10
   b) 20
   c) 50
   d) No limit
   Answer: b) 20
   Explanation: The Indian Partnership Act does not specify a limit, but the Companies Act, 2013 limits the number of partners in a firm to 20.
3. A minor can be admitted as a partner in a firm:
   a) As a full partner
   b) Only in cases of family business
   c) For profits only, not losses
   d) Never
   Answer: c) For profits only, not losses
   Explanation: As per Section 30 of the Act, a minor can be admitted to the benefits of the partnership but cannot be held liable for losses.

Part 2: Formation of Partnership

4. Which of the following is NOT a characteristic of a partnership?
   a) Agreement among partners
   b) Profit-sharing
   c) Unlimited liability
   d) Corporate legal personality
   Answer: d) Corporate legal personality
   Explanation: A partnership does not have a separate legal personality like a company.
5. A partnership agreement must be:
   a) Oral only
   b) Written only
   c) Either oral or written
   d) Registered under the Act
   Answer: c) Either oral or written
   Explanation: As per the Act, a partnership agreement can be oral or written, but a written agreement is preferred for clarity.
6. Which of the following does not dissolve a partnership firm?
   a) Expiry of the partnership term
   b) Death of a partner
   c) Admission of a new partner
   d) Insolvency of a partner
   Answer: c) Admission of a new partner
   Explanation: Admission of a new partner does not dissolve the firm but reconstitutes it.

Part 3: Duties and Rights of Partners

7. Which of the following is a duty of a partner under the Indian Partnership Act, 1932?
   a) To share profits equally
   b) To indemnify the firm for losses caused by their negligence
   c) To manage the business individually
   d) To invest in the firm without consent
   Answer: b) To indemnify the firm for losses caused by their negligence
   Explanation: Section 13 outlines that partners are responsible for indemnifying the firm for any losses caused by their actions.
8. A partner can retire from the partnership firm with:
   a) Consent of all partners
   b) Court approval
   c) Expiry of the agreement term
   d) Both a and c
   Answer: d) Both a and c
   Explanation: As per Section 32, a partner can retire with the consent of other partners or as per the terms of the agreement.
9. The right of a partner to take part in the conduct of the business is termed as:
   a) Right to profits
   b) Right to information
   c) Right to management
   d) Right to indemnity
   Answer: c) Right to management
   Explanation: Every partner has a right to participate in the management of the business unless otherwise agreed.

Part 4: Registration of Firms

10. Registration of a partnership firm under the Indian Partnership Act is:
    a) Compulsory
    b) Voluntary
    c) Compulsory for firms with over 5 partners
    d) Compulsory for all firms formed after 1932
    Answer: b) Voluntary
    Explanation: Registration of a firm is not mandatory under the Act but offers certain legal benefits.
11. Which of the following consequences occurs when a firm is not registered?
    a) The firm cannot sue third parties
    b) The firm is dissolved immediately
    c) The firm cannot file income tax returns
    d) The firm cannot make a profit
    Answer: a) The firm cannot sue third parties
    Explanation: As per Section 69, an unregistered firm cannot enforce legal claims against third parties.

Part 5: Dissolution of Partnership

12. A partnership firm can be dissolved without the intervention of a court by:
    a) Expiry of term
    b) Mutual agreement
    c) Insolvency of a partner
    d) All of the above
    Answer: d) All of the above
    Explanation: A firm can be dissolved due to mutual agreement, expiry of term, or insolvency as per the provisions of the Act.
13. In case of dissolution, the firm’s liabilities are settled in the following order:
    a) Debts to outsiders → Partner’s loans → Partner’s capital → Residue shared among partners
    b) Partner’s capital → Partner’s loans → Debts to outsiders → Residue shared among partners
    c) Debts to outsiders → Partner’s capital → Residue shared among partners → Partner’s loans
    d) Residue shared among partners → Debts to outsiders → Partner’s capital → Partner’s loans
    Answer: a) Debts to outsiders → Partner’s loans → Partner’s capital → Residue shared among partners
    Explanation: As per Section 48, the firm’s liabilities are settled in this order during dissolution.

Part 6: Miscellaneous

14. The doctrine of “holding out” under the Indian Partnership Act, 1932 is provided in:
    a) Section 29
    b) Section 30
    c) Section 27
    d) Section 28
    Answer: d) Section 28
    Explanation: Section 28 provides that if a person represents themselves as a partner, they are liable to third parties for the firm’s obligations.
15. Which of the following is NOT a mode of expulsion of a partner?
    a) Expulsion by majority
    b) Expulsion by court
    c) Expulsion under agreement
    d) Expulsion by creditors
    Answer: d) Expulsion by creditors
    Explanation: A partner cannot be expelled by creditors, as expulsion is governed by the terms of the partnership agreement or court orders.