Exam Question # Q.10. What is the difference between Partnership and Joint Hindu Family Firm?

 

Ans. Though both partnership and Joint Hindu Family firm are organized by groups of persons, there are some basic points of distinction arising from the different laws governing them.

The following are the points of distinction between these two:

1. Partnership firm can only arise as a result of contract between the partners. But a Joint Hindu Family business is the creation of law; the members of the joint family become co-partners by virtue of their status.

2. A partnership is governed by the Indian Partnership Act, but a Joint Hindu Family business is governed by the Hindu Law.

3. In the case of partnership, women can become the members of the partnership business but in the case of Joint Hindu Family business only male members can become co-partners. However, under Dayabhaga system of Hindu Law which is prevailing in West Bengal, female members can become co-partners under certain circumstances.

4. In the case of partnership firm, a minor cannot become a full-fledged partner, but in the case of the Joint Hindu Family business even a minor becomes a co­partner from the moment of his birth.

5. A partnership becomes illegal if the number of partners exceeds 10 in the case of banking business and 20 in the case of other business. But in the case of Joint Hindu Family business there is no maximum limit to the number of members.

6. In the case of partnership firm, though registration is not compulsory, usually all the firms are registered to get some benefits of registration. In the case of Joint Hindu Family business registration is not at all compulsory.

7. In partnership the death of a partner dissolves the partnership, but the Joint Hindu Family business is not affected by the death of a co-partner. Both partnership and Joint Hindu Family business can be dissolved through mutual agreement.

8. Every partner can take part in the management of the partnership business and any partner can bind his other partners by acts done in the ordinary course of the partnership business. But in the case of Joint Hindu Family business, only the Karta, the senior most member of the family, has the implied authority to manage the business and to bind the joint family business for all the acts done in the ordinary course of the business.

The Karta or Manager enjoys wide powers to borrow money, enter into contracts, mortgage or sell assets, or take any other action for the legitimate interest of the business.

9. The liability of partners in partnership business is joint and several to an unlimited extent. But in a Joint Hindu Family business the liability of every member except that of the Karta is limited to his interest in the joint property. The liability of the Karta is unlimited and the creditors of the firm can recover their debts even by selling the Karta’s personal properties.

10. The allocation of shares of partners in the partnership business is determined by the mutual agreement, and change in the shares of partners can take place only with the mutual consent of all the partners. In a Joint Hindu Family business, every co-partner enjoys equal share in the family business but the share of each member may fluctuate; it increases with the death of an existing co-partner and diereses with the birth of a new one.

11. If a partner dies, his interest in the partnership devolves on his heirs, whether they are admitted as partners or not. But in a Joint Hindu Family business, if a co-partner dies the undivided share of the debased co-partner devolves on the surviving co-partners and not on the heirs of the deceased by succession.

12. A partner in a partnership firm, after severing his connections, can ask for ac­counts of past profits and losses but it is otherwise in the case of a co-partner.