Question

Under Section 37 of the Indian Partnership Act, 1932, an outgoing partner may receive interest at the rate of:

• A. 5% p.a.
• B. 6% p.a.
• C. 8% p.a.
• D. 10% p.a.

Hint:

Under Section 37 of the Indian Partnership Act, 1932: \[ \mathrm{Outgoing\ Partner\ Interest} = 6\%\ \mathrm{p.a.} \]

Answer 1

The Correct Option is B

Step 1: Understanding the Concept:
Section 37 deals with the rights of an outgoing partner (retiring partner or the estate of a deceased partner) when their share in the firm is not immediately paid out after they cease to be a partner.
Step 2: Key Formula or Approach:
In the absence of a specific agreement, the outgoing partner has the option to choose between:
1. Such share of the profits earned after retirement as may be attributable to the use of their share of the property of the firm.
2. Interest at the rate of \( 6% \) per annum on the amount of their share in the property of the firm.
Step 3: Detailed Explanation:
When a partner retires or dies and the remaining partners continue to carry on the business without any final settlement of accounts, the outgoing partner's capital effectively becomes a loan to the firm.
To protect the interest of such a partner, the law provides a statutory interest rate of \( 6% \) p.a. if no other agreement exists.
Step 4: Final Answer:
The statutory rate of interest under Section 37 is \( 6% \) p.a.