Same business dispute
8 months ago
Me and my friend both started a partnership firm in the name of our fathers. Meaning that, the business was handled by both of us, our fathers were a dummy partner in papers only. After 5 years, my friend starts a new firm in the name of his sister who was also a dummy partner but all business was handled by my friend. The business of the two firms were exactly same and also my friend took away majority of clients from original business to his new business, Now after 7 years, dispute arises and both partners want to share the profits of the original firm. My friend says that he will not share the profits of the other company he started because I am not a partner of that firm. Is he right? Can he do so? Please read the question once more carefully and draft a suitable answer.
A partnership firm is governed by the terms and conditions of the Deed of Partnership executed by partners stating therein the rights and responsibilities of the partners and the ratio of sharing the profits and losses of the business by each partner. In the absence of any prohibitory clause in the Deed of Partnership, a partner can run another partnership firm and can enjoy its profit. But without being a partner of said partner can not claim a share of the profit of the said business run separately by your friend. In the absence of a specific clause in the deed of partnership prohibiting a partner to open or run a business of competitive character you cannot even terminate the relationship of partnership nor can expel him from the partnership. However when a dispute or difference between the partners is caused and if there is any clause of settlement of the dispute through arbitration is provided in the deed of partnership, you may invoke the settlement of the dispute through an Arbitrator and/or umpire serving a notice u/s.21 of the Arbitration and Conciliation Act, 1996 to the partner.
As your fathers are the legal partners of the firm, you cannot go to Court against your friend, you have no rights as on paper, you are not the partner of the firm. It is only when there is an issue between your father and your friend's father where the friend's father has done something wrong with regard to the partnership that you can file a suit against him
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