Section 52 of IPA : Section 52: Rights Where Partnership Contract Is Rescinded For Fraud Or Misrepresentation

IPA

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Explanation using Example

Imagine that Rita, Suman, and Anil entered into a partnership to start a bakery. Rita contributed ₹50,000, Suman ₹30,000, and Anil ₹20,000 as capital. After a year, Rita discovers that Anil had misrepresented the value of the baking equipment he put into the firm, which is actually worth much less than he claimed. Feeling cheated, Rita decides to rescind the partnership agreement on the grounds of Anil's misrepresentation.

Under Section 52 of The Indian Partnership Act, 1932, Rita is now entitled to:

  1. A lien on the remaining assets of the bakery after all its debts are paid, for the return of her ₹50,000 capital contribution and any amount she paid for her share in the partnership.
  2. Rank as a creditor in respect of any additional payments she might have made towards the bakery's debts.
  3. Be indemnified by Anil for all the debts of the bakery, since he was the one who committed the fraud.