MCQ on Indian Partnership Act 1932

Here’s an expanded set of multiple-choice questions under each part of the Indian Partnership Act, 1932, covering its provisions in more depth.

Part 1: Introduction to the Act

16. Which of the following is NOT essential to constitute a partnership?
    a) An agreement
    b) Sharing of profits
    c) Carrying on of business
    d) Limited liability
    Answer: d) Limited liability
    Explanation: Limited liability is a feature of LLPs (Limited Liability Partnerships), not traditional partnerships under the Indian Partnership Act.
17. Partnership can be formed for which of the following purposes?
    a) Carrying on a lawful business
    b) Charity
    c) Social work
    d) All of the above
    Answer: a) Carrying on a lawful business
    Explanation: A partnership can only be formed for carrying on a lawful business with the intention of sharing profits.
18. Which of the following relationships is governed by the Indian Partnership Act, 1932?
    a) Employer and employee
    b) Principal and agent
    c) Partners of a firm
    d) Trustee and beneficiary
    Answer: c) Partners of a firm
    Explanation: The Indian Partnership Act governs the relationship between partners of a firm.
19. The liability of partners in a partnership firm is:
    a) Limited to their capital contribution
    b) Unlimited
    c) Limited for all partners
    d) Determined by the partnership deed
    Answer: b) Unlimited
    Explanation: Partners in a traditional partnership have unlimited liability for the debts of the firm.

Part 2: Formation of Partnership

20. Partnership arises from:
    a) Operation of law
    b) Contract only
    c) Court orders
    d) Statutory provisions
    Answer: b) Contract only
    Explanation: Partnership arises from a contract between persons, as per Section 4 of the Act.
21. A partnership formed for a single venture is called:
    a) General partnership
    b) Particular partnership
    c) Limited liability partnership
    d) Joint venture
    Answer: b) Particular partnership
    Explanation: A partnership formed for a specific venture or undertaking is called a particular partnership, as per Section 8.
22. Which of the following is NOT a valid object of partnership?
    a) Running a business
    b) Sharing profits
    c) Committing illegal activities
    d) Managing a lawful trade
    Answer: c) Committing illegal activities
    Explanation: Partnerships can only exist for lawful purposes.
23. The sharing of profits between partners implies:
    a) Existence of partnership
    b) Business relationship
    c) Either a partnership or another relationship
    d) Creation of LLP
    Answer: c) Either a partnership or another relationship
    Explanation: Sharing of profits is an essential element, but it alone does not necessarily establish a partnership.

Part 3: Duties and Rights of Partners

24. The duty of a partner to act in good faith is termed as:
    a) Fiduciary duty
    b) Legal duty
    c) Ethical duty
    d) Professional duty
    Answer: a) Fiduciary duty
    Explanation: Partners owe a fiduciary duty to act in the best interests of the firm.
25. A partner who does not actively participate in the firm’s business is known as:
    a) Nominal partner
    b) Sleeping partner
    c) Secret partner
    d) Quasi-partner
    Answer: b) Sleeping partner
    Explanation: A sleeping partner contributes to capital and shares profits but does not take part in daily management.
26. In the absence of a partnership deed, profits are shared:
    a) According to capital contribution
    b) Equally among partners
    c) Based on seniority of partners
    d) As per mutual understanding
    Answer: b) Equally among partners
    Explanation: As per Section 13(b), profits are shared equally in the absence of an agreement to the contrary.
27. Which of the following is NOT a right of a partner?
    a) Right to participate in management
    b) Right to dissolve the firm unilaterally
    c) Right to inspect books of account
    d) Right to share profits
    Answer: b) Right to dissolve the firm unilaterally
    Explanation: A firm cannot be dissolved unilaterally unless the partnership agreement provides for such a right.

Part 4: Registration of Firms

28. The application for registration of a partnership firm is submitted to:
    a) Registrar of Companies
    b) Registrar of Firms
    c) District Court
    d) High Court
    Answer: b) Registrar of Firms
    Explanation: As per the Act, registration is done with the Registrar of Firms.
29. The registration of a firm is effective from:
    a) Date of submission of the application
    b) Date of receipt of the registration certificate
    c) Date of execution of the partnership deed
    d) Date mentioned in the partnership deed
    Answer: a) Date of submission of the application
    Explanation: The firm is considered registered from the date the registration application is submitted.
30. An unregistered firm can maintain a suit in which of the following cases?
    a) Against third parties
    b) Against its partners
    c) For set-off claims under ₹100
    d) For infringement of trademarks
    Answer: c) For set-off claims under ₹100
    Explanation: Section 69 allows unregistered firms to claim a set-off for amounts less than ₹100.

Part 5: Dissolution of Partnership

31. Dissolution of partnership and dissolution of the firm are:
    a) Identical concepts
    b) Different concepts
    c) Always occur simultaneously
    d) Not recognized under the Act
    Answer: b) Different concepts
    Explanation: Dissolution of partnership does not necessarily mean dissolution of the firm, as the firm may continue with reconstituted partners.
32. Compulsory dissolution of a firm occurs in cases of:
    a) Mutual agreement
    b) Insolvency of all partners
    c) Death of one partner
    d) Admission of a new partner
    Answer: b) Insolvency of all partners
    Explanation: A firm is dissolved compulsorily if all partners become insolvent.
33. Which of the following is NOT a ground for dissolution by court?
    a) Unsound mind of a partner
    b) Persistent breach of agreement by a partner
    c) Losses making the business unviable
    d) Change in the firm’s business activity
    Answer: d) Change in the firm’s business activity
    Explanation: A change in business activity does not warrant dissolution by the court.

Part 6: Miscellaneous

34. Which of the following rights is available to an outgoing partner?
    a) Right to share future profits
    b) Right to demand dissolution
    c) Right to claim goodwill
    d) Right to admit new partners
    Answer: c) Right to claim goodwill
    Explanation: An outgoing partner has the right to claim goodwill as per the terms of the agreement or law.
35. The relationship between partners is primarily governed by:
    a) Partnership deed
    b) Companies Act
    c) Indian Trusts Act
    d) Contract Act
    Answer: a) Partnership deed
    Explanation: The partnership deed specifies the terms governing the partners’ relationship.