1. Which of the following best explains the legal status of a firm under the Indian Partnership Act, 1932?
A. The firm is a legal person distinct from its partners
B. The firm is a corporate body
C. The firm is not a legal entity separate from its partners
D. The firm is a juristic person
B. The firm is a corporate body
C. The firm is not a legal entity separate from its partners
D. The firm is a juristic person
Answer: C. The firm is not a legal entity separate from its partners
Explanation:
Under Section 4 of the Indian Partnership Act, a firm is merely a collective name for all partners. It has no separate legal personality unlike a company. The partners are collectively and individually liable for the firm’s acts.
Under Section 4 of the Indian Partnership Act, a firm is merely a collective name for all partners. It has no separate legal personality unlike a company. The partners are collectively and individually liable for the firm’s acts.
2. Which of the following statements about mutual agency is incorrect?
A. Every partner is an agent of the firm and other partners
B. A partner can bind the firm by his acts done in the course of business
C. Mutual agency is the true test of partnership
D. A sleeping partner is not bound by acts of active partners
B. A partner can bind the firm by his acts done in the course of business
C. Mutual agency is the true test of partnership
D. A sleeping partner is not bound by acts of active partners
Answer: D. A sleeping partner is not bound by acts of active partners
Explanation:
A sleeping partner, though inactive in management, is still liable for the acts of other partners done in the ordinary course of business due to mutual agency, which is the hallmark of a partnership.
A sleeping partner, though inactive in management, is still liable for the acts of other partners done in the ordinary course of business due to mutual agency, which is the hallmark of a partnership.
3. Under the Indian Partnership Act, 1932, a minor:
A. Can become a full-fledged partner
B. Cannot be admitted to benefits of partnership
C. Can be admitted to benefits of partnership with consent of all partners
D. Can bind the firm by his actions
B. Cannot be admitted to benefits of partnership
C. Can be admitted to benefits of partnership with consent of all partners
D. Can bind the firm by his actions
Answer: C. Can be admitted to benefits of partnership with consent of all partners
Explanation:
As per Section 30, a minor cannot become a partner but can be admitted to the benefits of partnership with the consent of all partners. He has limited rights and is not personally liable for firm debts.
As per Section 30, a minor cannot become a partner but can be admitted to the benefits of partnership with the consent of all partners. He has limited rights and is not personally liable for firm debts.
4. Which of the following does not constitute a dissolution of partnership firm?
A. Dissolution by agreement
B. Death of a partner
C. Retirement of a partner
D. Admission of a new partner
B. Death of a partner
C. Retirement of a partner
D. Admission of a new partner
Answer: D. Admission of a new partner
Explanation:
Admission of a new partner constitutes a reconstitution, not dissolution. Dissolution involves complete termination of partnership between all partners, whereas admission alters the existing agreement without dissolving the firm.
Admission of a new partner constitutes a reconstitution, not dissolution. Dissolution involves complete termination of partnership between all partners, whereas admission alters the existing agreement without dissolving the firm.
5. The maximum number of partners in a partnership firm carrying on a banking business is:
A. 10
B. 20
C. 50
D. As per the Partnership Act
B. 20
C. 50
D. As per the Partnership Act
Answer: A. 10
Explanation:
As per Rule 10 of Companies (Miscellaneous) Rules, 2014, the maximum number of partners in a banking partnership is 10. For other businesses, it is 50. This overrides the old limit of 20.
As per Rule 10 of Companies (Miscellaneous) Rules, 2014, the maximum number of partners in a banking partnership is 10. For other businesses, it is 50. This overrides the old limit of 20.
6. Which of the following is not a ground for compulsory dissolution under Section 41 of the Act?
A. All partners becoming insolvent
B. Completion of the partnership term
C. Business becoming unlawful
D. Death of all partners
B. Completion of the partnership term
C. Business becoming unlawful
D. Death of all partners
Answer: B. Completion of the partnership term
Explanation:
Completion of the term is a ground for dissolution by agreement or expiry, not compulsory dissolution under Section 41. Compulsory dissolution arises from illegality or insolvency.
Completion of the term is a ground for dissolution by agreement or expiry, not compulsory dissolution under Section 41. Compulsory dissolution arises from illegality or insolvency.
7. The liability of a retired partner continues until:
A. The end of the financial year
B. The firm files its returns
C. Notice of retirement is given to third parties
D. Six months after retirement
B. The firm files its returns
C. Notice of retirement is given to third parties
D. Six months after retirement
Answer: C. Notice of retirement is given to third parties
Explanation:
As per Section 32(3), a retired partner remains liable for firm acts until notice is given to third parties or the registrar. Without such notice, third parties may assume the retired partner is still liable.
As per Section 32(3), a retired partner remains liable for firm acts until notice is given to third parties or the registrar. Without such notice, third parties may assume the retired partner is still liable.
8. Under the Indian Partnership Act, a partner has an implied authority to:
A. Admit liability in a suit
B. Submit disputes to arbitration
C. Borrow money for firm’s business
D. Transfer firm property
B. Submit disputes to arbitration
C. Borrow money for firm’s business
D. Transfer firm property
Answer: C. Borrow money for firm’s business
Explanation:
Section 19 outlines implied authority, which includes borrowing money in the usual course of business. However, acts like submitting disputes to arbitration or admitting liability in suits require express authority.
Section 19 outlines implied authority, which includes borrowing money in the usual course of business. However, acts like submitting disputes to arbitration or admitting liability in suits require express authority.
9. Which of the following does not require registration of a partnership firm?
A. Suing a third party
B. Enforcing rights against a partner
C. Filing for winding up
D. Defending a suit by a third party
B. Enforcing rights against a partner
C. Filing for winding up
D. Defending a suit by a third party
Answer: D. Defending a suit by a third party
Explanation:
An unregistered firm cannot sue to enforce contractual rights against third parties or partners, but it can defend itself in a suit. This is laid out in Section 69 of the Act.
An unregistered firm cannot sue to enforce contractual rights against third parties or partners, but it can defend itself in a suit. This is laid out in Section 69 of the Act.
10. When a firm is dissolved, the authority of partners:
A. Continues indefinitely
B. Ceases completely
C. Continues to wind up affairs
D. Shifts to the Registrar
B. Ceases completely
C. Continues to wind up affairs
D. Shifts to the Registrar
Answer: C. Continues to wind up affairs
Explanation:
Section 47 states that the partners’ authority continues only for the purpose of winding up the firm’s affairs and completing unfinished transactions unless expressly agreed otherwise.
Section 47 states that the partners’ authority continues only for the purpose of winding up the firm’s affairs and completing unfinished transactions unless expressly agreed otherwise.
Read More: MCQs on Indian Partnership Act- Part I
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Ruchika Mohapatra
Contributing author
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