By Harshvardhan, Subject Matter Expert at Edumarz
Solution: A person is considered a partner by estoppel if, he/she gives an impression to others that he or she is a partner of the firm through his/her own initiative, conduct or behaviour. Such partners are held liable for the debts of the firm because in the eyes of the third party they are considered partners, even though they do not contribute capital or take part in its management. Suppose Neha is a friend of Poonam who is a partner in a Consultancy firm —Edumarz. At Poonam’s request, Neha accompanies her to a business meeting with Mohan Softwares and actively participates in the negotiation process for a business deal and gives the impression that she is also a partner in Simplex Solutions. If credit is extended to Edumarz on the basis of these negotiations, Rani would also be liable for repayment of such debt, as if she is a partner of the firm. This is provided in the Indian Partnership Act,1932 and The Indian Evidence Act to protect people from being conned upon by unscrupulous fraudsters. No one can escape from such liability if he has pretended to be a Partner of a firm he has no relation to in reality.