II. Very Short Answer Questions

Question 1. Who is called KARTA?

Answer: All the affairs of a Joint Hindu Family are controlled and managed by one person who is known as 'Karta' or 'Manager'.

 

Question 2. What are the two schools of Hindu law?

Answer:

1. Dayabhaga and

2. Mitakshara

 

Question 3. Who is a called a Partner?

Answer: The persons who enter into partnership are individually called as 'Partners'.

 

Question 4. Who is a Sleeping partner?

Answer: Sleeping partner is a business partner who doesn't play an active role in running the day-to-day operations of a business, who instead, finances the business in the form of capital investment.

 

Question 5. Who is a Minor?

Answer: Under the Indian Majority Act, person who has not completed 18 years of age is a minor.

 

Question 6. How many types of Dissolution?

Answer:

There are two types of Dissolution, They are

1. without order of court.

2. By order of court.

 

III. Short Answer Questions

 

Question 1. What is the meaning of Joint Hindu Family Business?

Answer: The Joint Hindu Family Business is a distinct form of organisation peculiar to India. Joint Hindu Family Firm is created by the operation of law. It does not have any separate and distinct legal entity from that of its members.

 

Question 2. Write any 3 features of HUF?

Answer:

1. Governed by Hindu Law: The business of the Joint Hindu Family is controlled and managed under the Hindu law.

2. Membership by Birth: The membership of the family can be acquired only by birth. As soon as a male child is born in the family, that child becomes a member.

3. Liability: Except the Karta, the liability of all other members is limited to their shares in the business.

 

Question 3. Explain the nature of liability of Karta.

Answer: The Karta is not only liable to the extent of his share in the business but his separate property is equally attachable and amount of debt can be recovered from his personal property.

 

Question 4. What is the meaning of Coparceners?

Answer: The members of the Joint Hindu Family business are called Coparceners. It is regulated by the provisions of Hindu Law. According to Hindu Succession Act 1956, a Coparcener will have a share in the Coparcenaries property after the death of the Coparcener.

 

Question 5. Define Partnership?

Answer: According to Prof. Haney, "The relations which exist between persons, competent to make contracts, who agree to carry on a lawful business in common with a view to private gain-.

 

Question 6. What is the minimum and maximum number of members in the partnership concern? Answer: Since partnership is the outcome of an agreement, the minimum number of persons required to form a partnership is two. Maximum is restricted to 10 in the case of banking business and to 20 in all other cases.

 

Question 7. What is the meaning of Partnership Deed?

Answer: Though a partnership agreement need not necessarily be in writing, it is important to have a written agreement in order to avoid misunderstandings; it is desirable to have a written agreement. A carefully drafted partnership deed helps in ironing out differences which may develop among partners and in ensuring smooth running of the partnership business. It should be properly stamped and registered.

 

Question 8. Who is called a Secret partner?

Answer: A secret partner is one whose association is not known to the general public. Other than this distinct feature, he is like rest of the partners in all respects.

 

Question 9. What is meant by Joint and Several Liability?

Answer: Every partner is jointly and severally liable for all acts of the firm. It means that in case the assets are inadequate for meeting the claims of creditors, even their personal properties should be made available. The creditors can recover their claims from all the partners.

 

IV. Long Answer Questions

 

Question 1. What is the implied authority of Karta?

Answer:

1. In a joint family firm, only Karta has the implied authority to enter into a contract for debts and pledge the property of the firm for the ordinary purpose of the business of the firm.

 

2. The Karta is the senior most male member of the family. The members of the family have full faith and confidence in Karta. Only Karta is entitled to deal with outsiders. But other members can deal with outsiders only with the permission of Karta.

 

3. Except the Karta, the liability of all other members is limited to their shares in the business. The Karta is not only liable to the extent of his share in the business but his separate property is equally attachable and amount of debt can be recovered from his personal property.

 

Question 2. Can a minor be admitted in the Joint Hindu Family business — Why?

Answer: In a partnership, minor cannot become co — partner though he may be admitted to the benefit of partnership. In a Joint Hindu Family firm even a new born baby can be a partner. The membership of the family can be acquired only by birth. As soon as the male child is born in the family, that child becomes the member.

 

Question 3. What are the contents of the partnership deed?

Answer:

1. Name: Name of the firm.

 

2. Nature of Business: Nature of the proposed business to be carried on by the partners.

 

3. Duration of Partnership : Duration of the partnership business whether it is to be run for a fixed period of time or whether it is to be dissolved after completing a particular venture.

 

4. Capital Contribution: The capital is to be contributed by the partners. It must be remembered that capital contribution is not necessary to become a partner for, one contribute his organising power, business acumen, managerial skill etc., instead of capital.

 

5. Withdrawal from the Firm: The amount that can be withdrawn from the firm by each partner.

 

6. Profit/Loss Sharing: The ratio in which the profits or losses are to be shared. If the profit sharing ratio is not specified in the deed, all the partners must share the profits and bear the losses equally.

 

7. Interest on Capital: Whether any interest is to be allowed on capital and if so, the rate of interest.

 

8. Rate of Interest on Drawing: Rate of interest on drawings, if any.

 

9. Loan from Partners: Whether loans can be accepted from the partners and if so the rate of interest payable thereon. 10. Account Keeping: Maintenance of accounts and audit.

 

11. Salary and Commission to Partners: Amount of salary or commission payable to partners for their services. (Unless this is specifically provided, no partner is entitled to any salary).

 

12. Retirement: Matters relating to retirement of a partner. The arrangement to be made for paying out the amount due to a retired or deceased partner must also be stated.

 

13. Goodwill Valuation: Method of valuing goodwill on the admission, death or retirement of a partner.

 

14. Distribution of Responsibility: Distribution of managerial responsibilities. The work that is entrusted to each partner is better stated in the deed itself.

 

15. Dissolution Procedure: Procedure for dissolution of the firm and the mode of settlement of accounts thereafter.

 

16. Arbitration of Dispute: Arbitration in case of disputes among partners. The deed should provide the method for settling disputes or difference of opinion. This clause will avoid costly litigations.

 

Question 4. Explain the types of dissolution of partnership firm.

Answer:


i. Dissolution of a partnership firm is taken place in two ways.

a. without the order of the court and

b. By order of the court.

 

a. Without the order of the court

i. By agreement or mutual consent

A firm may be dissolved when all the partners agree to close the affairs of the firm. Just as a partnership is created by contract, it can also be terminated by contract.

 

ii. By insolvency of all the partners but one

If any of the partners adjudged an insolvent (or if all the partners become insolvent) it is necessary to dissolve the firm.

 

iii. When the objective becomes illegal

When the business carried on by the partnership becomes illegal, the partnership firm is automatically dissolved.

 

iv. By notice of dissolution

In the case of partnership at will when any partner gives in writing to all the other partners indicating his intention to dissolve the firm, the firm will be dissolved.

 

V. On certain contingencies:

Dissolution of partnership itself may involve the dissolution of the firm unless parties agree to continue it otherwise, it will take place.

i. On the expiry of a specified period in case of partnership for a fixed term.

ii. On the completion of a particular adventure for which it has been formed in case of particular partnership.

iii. On the death of a partner.

iv. On the retirement of a partner.

v. On the insolvency of a partner.

 

In all the above cases if the business is not continued by the remaining partners, dissolution of the firm takes place automatically.

 

b. Dissolution through court

The court may order dissolution of a firm at a suit of a partner in any of the following circumstances:

a. When a partner becomes insane

b. Permanent incapacity of any partner

c. Misconduct of any partner

d. Breach of agreement which makes the business impracticable

e. Transfer of interest to third person

f. Continued loss g. When the court finds that it is just and equitable to dissolve the firm

 

Question 5. Write any three differences between Dissolution of Partnership and Dissolution of Firm? Answer:

Basis

Dissolution of Partnership

Dissolution of Firm

Termination

1. In the case of dissolution of partnership, only one or more of the partners terminate their connections with the firm.

Whereas all the partners terminate their connections with the firms in the case of dissolution of firm.

Business

2. Dissolution of partnership may or may not bring the business of the firm to an end.

But dissolution of the firm brings the business of the firm to an end.

Closure of books of accounts

No need to close account boos, as the business continues to operate.

All books of account are closed.

 Question 6. Write the procedure for Registration of a Firing Procedure for registration:

Answer: A statement should be prepared stating the following particulars.

1. Name of The firm.

2. The principal place of business.

3. Name of other places where the firm carried on business.

4. Names and addresses of all the partners.

5. The date on which .each partner joined the firm.

6. The duration of the firm.

This statement signed by all the partners should be produced to the Registrar of Firms along with the necessary registration fee of Rs.3. Any change in the above particulars must be communicated to the Registrar within 14 days of such alteration.