Which of the following statement is incorrect?
Which of the following statement is incorrect?
Solution
Looking at each statement to identify the incorrect one:
Option 1 - A valid partnership can exist without a written agreement. According to the Indian Partnership Act, 1932, partnerships can be formed through written agreement, oral agreement, or even implied by conduct. Written partnership deed is not mandatory. This statement is correct.
Option 2 - When there is no partnership deed (or if the deed is silent on profit sharing), Section 13 of the Indian Partnership Act, 1932 provides that all partners share profits and losses equally. This statement is correct.
Option 3 - The maximum number of partners prescribed by the Central Government can be 50. While the Companies Act, 2013 removed certain restrictions, this statement reflects the general applicable limit. This statement is correct.
Option 4 - The partnership deed is a comprehensive document that can include various clauses as per the mutual agreement of partners. The method of settlement of disputes among partners is actually one of the important contents that can be and often is included in the partnership deed. Partners commonly include arbitration clauses or other dispute resolution mechanisms in their deed.
This statement claims that dispute settlement methods cannot be part of the partnership deed, which is completely wrong. In fact, including such provisions is considered good practice to avoid future litigation.
Therefore, Option 4 is the incorrect statement.