MCQ on Indian Partnership Act 1932

Here is the continuation of the 100 multiple-choice questions on the Indian Partnership Act, 1932:

16. In a partnership firm, the authority to bind the firm by acts of partners is based on the principle of:
    a) Mutual consent
    b) Mutual agency
    c) Joint liability
    d) Absolute authority
    Answer: b) Mutual agency
    Explanation: Mutual agency means that any partner can act on behalf of the firm and bind other partners.
17. Which of the following is NOT a type of partner?
    a) Active partner
    b) Nominal partner
    c) Artificial partner
    d) Sleeping partner
    Answer: c) Artificial partner
    Explanation: There is no concept of an artificial partner under the Act.
18. The term “partnership property” is defined in:
    a) Section 15
    b) Section 14
    c) Section 18
    d) Section 20
    Answer: b) Section 14
    Explanation: Section 14 deals with property and rights belonging to the firm.
19. An act done by a partner beyond their authority is:
    a) Void
    b) Voidable at the firm’s discretion
    c) Binding on the firm
    d) Illegal
    Answer: b) Voidable at the firm’s discretion
    Explanation: Acts beyond a partner’s authority may bind the firm if ratified by other partners.
20. A minor admitted to the benefits of a partnership:
    a) Has equal rights as other partners
    b) Cannot share profits
    c) Cannot be held liable for losses
    d) Can dissolve the firm
    Answer: c) Cannot be held liable for losses
    Explanation: A minor is admitted only to share profits and has no liability for losses.
21. A partner who lends money to the firm is entitled to:
    a) Interest at 10%
    b) Interest at 6%
    c) No interest
    d) Interest only when profits are available
    Answer: b) Interest at 6%
    Explanation: Section 13(d) provides for 6% interest on loans by partners to the firm.
22. Registration of a partnership firm is:
    a) Mandatory
    b) Optional
    c) Automatic
    d) A court’s discretion
    Answer: b) Optional
    Explanation: Registration is not mandatory but offers legal advantages under Section 69.
23. A registered firm can file a suit against:
    a) A third party
    b) Its partners
    c) The government
    d) All of the above
    Answer: d) All of the above
    Explanation: A registered firm can sue for rights enforceable under the law.
24. Dissolution of a partnership occurs when:
    a) One partner retires
    b) One partner becomes insolvent
    c) Business is wound up
    d) All of the above
    Answer: d) All of the above
    Explanation: Dissolution can occur due to retirement, insolvency, or winding up.
25. The liability of a retired partner for acts done before retirement is:
    a) Ceased automatically
    b) Ceased after one year
    c) Unlimited unless a public notice is given
    d) Limited to their capital contribution
    Answer: c) Unlimited unless a public notice is given
    Explanation: A retired partner remains liable unless a public notice of retirement is issued.
26. In case of dissolution of the firm, the first priority in the distribution of assets is given to:
    a) Partners’ loans
    b) Partners’ capital
    c) Outside creditors
    d) Partners’ profits
    Answer: c) Outside creditors
    Explanation: Section 48 prioritizes the payment of outside creditors over partners’ claims.
27. The doctrine of “holding out” under the Indian Partnership Act applies to:
    a) Active partners
    b) Retired partners
    c) Nominal partners
    d) Partners who falsely represent themselves as part of the firm
    Answer: d) Partners who falsely represent themselves as part of the firm
    Explanation: Under Section 28, the doctrine binds individuals who represent themselves as partners to third parties.
28. In the absence of an agreement, interest on capital is:
    a) Paid at 6%
    b) Paid at 10%
    c) Not paid
    d) Paid only if there are profits
    Answer: c) Not paid
    Explanation: Section 13(c) states that interest on capital is not payable unless there is an agreement.
29. A partnership can be dissolved by the court under:
    a) Section 39
    b) Section 44
    c) Section 46
    d) Section 49
    Answer: b) Section 44
    Explanation: Section 44 lists grounds for dissolution by the court.
30. A partner who takes part in the management of the firm is called:
    a) Nominal partner
    b) Sleeping partner
    c) Active partner
    d) Minor partner
    Answer: c) Active partner
    Explanation: An active partner actively participates in the firm’s management.
31. Which section defines “Partnership”?
    a) Section 4
    b) Section 10
    c) Section 12
    d) Section 14
    Answer: a) Section 4
    Explanation: Section 4 defines “partnership” as a relationship between persons who agree to share profits of a business.
32. Which of the following is NOT a mode of dissolution?
    a) By mutual consent
    b) By insolvency of a partner
    c) By a court decree
    d) By operation of law
    Answer: d) By operation of law
    Explanation: Dissolution happens by specific modes mentioned in the Act.
33. The registration of a partnership firm is done with:
    a) Registrar of Companies
    b) Registrar of Firms
    c) Ministry of Finance
    d) High Court
    Answer: b) Registrar of Firms
    Explanation: Firms are registered with the Registrar of Firms in the concerned state.
34. Which document is essential for registering a partnership firm?
    a) Partnership deed
    b) Articles of Association
    c) Memorandum of Association
    d) Contract agreement
    Answer: a) Partnership deed
    Explanation: A partnership deed contains the terms and conditions of the partnership and is required for registration.
35. A partnership firm can be reconstituted in case of:
    a) Admission of a partner
    b) Retirement of a partner
    c) Death of a partner
    d) All of the above
    Answer: d) All of the above
    Explanation: A partnership can be reconstituted when changes occur in its partners.