Section 37 of IPA : Section 37: Right Of Outgoing Partner In Certain Cases To Share Subsequent Profits

Explanation using Example

Imagine a scenario where Raj, Suman, and Alok are partners in a business. Unfortunately, Alok passes away. Raj and Suman decide to continue the business without settling Alok's account. They use Alok's contribution in the business to generate profits. According to Section 37 of The Indian Partnership Act, 1932, Alok's heirs are entitled to either a share of the profits that can be attributed to Alok's investment in the firm since his passing or interest at 6% per annum on Alok's share of the property, unless there was a previous agreement stating otherwise.

However, if Raj and Suman had an agreement with Alok that allowed them to buy out Alok's share in the event of his death, and they follow through with this agreement properly, then Alok's heirs would not be entitled to any share of the profits after Alok's death. But if Raj and Suman do not honor the buyout terms completely, they are liable to account to Alok's heirs under the provisions of this section.