Indian Partnership Act
Expulsion of a Partner: Section 33
Partners cannot vote a colleague out because they have tired of him. Section 33 allows expulsion only where three conditions are satisfied together: the power must be conferred by contract, it must be exercised by the majority the contract specifies, and it must be exercised in absolute good faith. If any one fails, the expulsion is wrongful and the partner remains a partner. Where it succeeds, the expelled partner is treated exactly like a retired partner. This note sets out the conditions, the tests of good faith, and the consequences.
The three locks on the power to expel, wrongful expulsion, the position after a valid expulsion, and the comparison with retirement
1. The Provision
§ Section 33 (1) A partner may not be expelled from a firm by any majority of the partners, save in the exercise in good faith of powers conferred by contract between the partners. (2) The provisions of sub-sections (2), (3) and (4) of Section 32 apply to an expelled partner as if he were a retired partner. |
2. The Three Conditions
Condition | What it requires | If it fails |
|---|---|---|
A power conferred by contract | The partnership deed must confer a power of expulsion; the Act gives none | No expulsion is possible, however grave the misconduct; the remedy is dissolution by the court under Section 44 |
Exercised by the majority | By the majority the contract specifies; the partner sought to be expelled is not counted in making up that majority | The expulsion is invalid |
In absolute good faith | For the benefit of the firm, honestly, after telling the partner the charge and hearing him | The expulsion is invalid, whatever the deed says |
3. Tests of Good Faith
§ What courts look for • In the interest of the firm. The power must be used for the benefit of the partnership as a whole, not to remove an inconvenient partner or to seize his share. • Notice of the charge. The partner must be told what is alleged against him. • An opportunity to be heard. He must be given a real chance to explain before the decision is taken. • Honest decision. The majority must consider his explanation and decide honestly on the material. • Motive matters. Expulsion timed to deprive a partner of a valuable share, or to take over a contract he brought in, is not good faith. |
4. Wrongful Expulsion
i. It is inoperative. The partner remains a partner, with all his rights in the firm.
ii. Remedies. He may sue for a declaration and for his rights, seek accounts, and claim damages for any loss suffered.
iii. Or dissolution. He may treat the relationship as broken and seek dissolution by the court under Section 44, which allows dissolution on grounds including conduct that makes it impracticable to carry on the business.
iv. Practical caution for the majority. Record the charge, the hearing and the reasons; an unrecorded expulsion is hard to defend.
5. After a Valid Expulsion
Applied provision | Effect on the expelled partner |
|---|---|
s. 32(2) | He remains liable for acts of the firm done before his expulsion, unless discharged by agreement with the creditor and the partners of the reconstituted firm |
s. 32(3) | He and the partners remain liable to third parties for later acts until PUBLIC NOTICE of the expulsion is given, save as to a person who dealt with the firm without knowing he was a partner |
s. 32(4) | The public notice may be given by the expelled partner or by any partner of the reconstituted firm |
Other rights | He is entitled to the settlement of his share, to the option in Section 37 where accounts remain unsettled, and to the freedoms in Section 36 |
6. Expulsion and Retirement Compared
Basis | Expulsion, s. 33 | Retirement, s. 32 |
|---|---|---|
Who decides | The majority, under a power in the deed | The partner himself, with consent, by agreement, or by notice if at will |
Consent of the partner | Not required | It is his own act |
Conditions | Power, majority and good faith, all three | Compliance with one of the routes in Section 32(1) |
Consequences | Identical: Section 33(2) applies Section 32(2) to (4) | As provided in Section 32 |
If done wrongly | The expulsion is ineffective and the partner remains | A retirement in breach of the deed may sound in damages |
7. Frequently Asked Questions
Can a majority of partners expel a partner?
Only in the exercise, in good faith, of a power conferred by the partnership contract; otherwise no majority can expel.
What are the tests of good faith in expulsion?
That the power was used in the interest of the firm, that the partner was told the charge and heard, and that the decision was taken honestly.
What is the effect of a wrongful expulsion?
It is inoperative: the partner remains a partner and may sue for his rights, damages, or dissolution by the court under Section 44.
Is an expelled partner in the same position as a retired one?
Yes. Section 33(2) applies sub-sections (2), (3) and (4) of Section 32 to him.