Partnership and Joint Hindu Family

Joint Hindu Family is a unique form of business organisation prevailing only in India. It is the business which belongs to Hindu undivided family and is governed by the provisions of Hindu Law.




In Hindu Law there are two schools:

a) Mitakshara: It is applicable to the whole of India except Bengal and Assam. According to this school, a Hindu inherits property from his father, grandfather and great-grandfather. Thus, three successive generations in the male line (son, grandson, and great-grandson) inherit the ancestral property. They are called ‘coparceners and the senior most member of the family is called ‘Karta’. The Hindu Succession Act, 1956 is extended the line of coparcenary interest to female relatives of the deceased coparcener or male relatives claiming through such female relatives.

b) Dayabhaga: It is applicable in Bengal and Assam. According to this, the male heirs become members only on the death of the father.

According to Hindu Law, a business is an inheritable asset. After the death of a Hindu, the business will be jointly owned by all the coparceners. The elder person among the coparceners becomes the new Karta and manages the business. If any property is inherited from any other relative, or acquired from personal resources, such property is regarded as personal property and treated as distinct from ancestral property.

Important features of the Joint Hindu Family firm are:

1. Business is managed by the senior member of the family called Karta. Other members do not have the right to participate in the management of the firm.

2. Other members cannot question the authority of the Karta. Their only remedy is to get the family dissolved by mutual agreement.

3. Karta has the power to borrow funds for the business. The liability of the Karta is unlimited whereas the other coparceners are liable only to the extent of their share in the business.

4. If the Karta has misappropriated the funds of the business, he has to compensate the other coparceners to the extent of their shares in the joint property.

5. The death of any member of the family does not dissolve the business of the family.

6. Through mutual agreement, the Joint Hindu Family firm can be dissolved.

Comparing the above features of a Joint Hindu Family with the essential characteristics of a partnership firm, we can easily ascertain the points of difference between the two. These can be summarised as follows.

1. Creation: Partnership comes into existence by an agreement. A Joint Hindu Family is created by status or operations of law, no agreement is needed for it.

 

2. Regulating law: A partnership is governed by the provisions of the Indian Partnership Act, 1932. A Joint Hindu Family business in governed by Hindu Law.

 

3. Admission of new members: No person can be admitted to the existing partnership without the consent of all the other partners. A person becomes a member (coparcener) in Joint Hindu Family merely by his birth.

 

4. Minor member: A minor cannot become a partner in a firm, he can be admitted only to the benefits of the firm. In Joint Hindu family, a person becomes a coparcener right on his birth.

 

5. Number of members: There is a limit on the number of partners in a firm. But there is no limit on the number of coparceners in Joint Hindu Family.

 

6. Authority for active participation: Each partner can participate in the business of the firm and bind the other partners by his acts. In Joint Hindu Family this authority rests with Karta only. Of course, the other members can be allowed by Karta to take part in family business.

 

7. Liability of members: In partnership, the liability of all the partners is unlimited; they are personally liable to third parties for the debts of the firm. In Joint Hindu Family only Karta’s liability is unlimited, the other coparceners liability is limited only to their shares in the family property.

 

8. Right to demand account: Each partner has a right to inspect and copy the account books and, on severing connections with the firm, he can demand even the account of the past dealings. The coparceners have no right to ask for the account of part dealings, they can ask for the position of the existing assets only.

 

9. Death of a member: In the absence of any agreement to the contrary, partnership is dissolved on the death of any partner. The Joint Hindu Family continues to operate even after the death of a coparcener.

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