SECTION 13

 MUTUAL RIGHTS AND LIABILITIES (SECTION 13):

 Subject to contract between the partners-

(a) a partner is not entitled to receive remuneration for taking part in the conduct of the business;

(b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm;

(c) where a partner is entitled to interest on the capital subscribed by him such interest shall be payable only out of profits;

(d) a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six percent per annum;

(e) the firm shall indemnify a partner in respect of payments made and liabilities incurred by him-

       (i) in the ordinary and proper conduct of the business, and

       (ii) in doing such act, in an emergency, for the purposes of protecting the firm from loss, as           would be done by a person of ordinary prudence, in his own case, under similar circumstances; and

(f) a partner shall indemnify the firm for any loss caused to it by his wilful neglect in the conduct of business of the firm. 

Analysis of section 13

(i) Right to remuneration [Section 13(a)]: No partner is entitled to receive any remuneration in addition to his share in the profits of the firm for taking part in the business of the firm. But this rule can always be varied by an express agreement, or by a course of dealings, in which event the partner will be entitled to remuneration. Thus, a partner can claim remuneration even in the absence of a contract, when such remuneration is payable under the continued usage of the firm. In other words, where it is customary to pay remuneration to a partner for conducting the business of the firm he can claim it even in the absence of a contract for the payment of the same.

(ii) Right to share Profits [Section 13 (b)]: Partners are entitled to share equally in the profits earned and so contribute equally to the losses sustained by the firm. The amount of a partner’s share must be ascertained by enquiring whether there is any agreement in that behalf between the partners. If there is no agreement then you should make a presumption of equality and the burden of proving that the shares are unequal, will lie on the party alleging the same.

There is no connection between the proportion in which the partners shall share the profits and the proportion in which they have contributed towards the capital of the firm.

(iii) Interest on Capital [Section 13 (c)]: The following elements must be there before a partner can be entitled to interest on moneys brought by him in the partnership business: (i) an express agreement to that euect, or practice of the particular partnership or (ii) any trade custom to that euect; or (iii) a statutory provision which entitles him to such interest.

(iv) Interest on advances [Section 13 (d)]: Suppose a partner makes an advance to the firm in addition to the amount of capital to be contributed by him, in such a case, the partner is entitled to claim interest thereon @ 6% per annum. While interest on capital account ceases to run on dissolution, the interest on advances keep running even after dissolution and up to the date of payment.

(v) Right to be indemnified [Section 13 (e)]: Every partner has the right to be indemnified by the firm in respect of payments made and liabilities incurred by him in the ordinary and proper conduct of
the business of the firm as well as in the performance of an act in an emergency for protecting the firm from any loss, if the payments, liability and act are such as a prudent man would make, incur or perform in his own case, under similar circumstances.

(vi) Right to indemnify the firm [Section 13 (f)]: A partner must indemnify the firm for any loss caused to it by wilful neglect in the conduct of the business of the firm.