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Section 242: Sections 239 to 266 [Repealed by the Indian Partnership Act, 1932]

Indian Contract Act • Official Statutory Text & Practice Guide

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Act 1872
Section 75 All 266 Sections of Indian Contract Act Section 77

Legal Commentary & Landmark Judgments: Section 242

Section 242 historically protected the widow or child of a deceased partner receiving an annuity out of profits from being treated as a partner, now reenacted as Section 6, Explanation 2(c) of the Indian Partnership Act, 1932.

  • Protection of Compassionate Annuities: Historically shielded dependent family members of deceased partners receiving maintenance or annuity payments out of firm profits from being held liable for firm debts.
  • Complete Disconnection from Management: Dependent annuitants have no status as partners, possessing neither the power to interfere in the firm's business nor mutual agency to bind surviving partners.
  • Modern Reenactment in IPA 1932: Repealed by Act 9 of 1932 and preserved in Section 6 Explanation 2(c) of the Indian Partnership Act, 1932, protecting family settlements and partnership survivorship covenants.
Key Landmark Precedents:
  • Holme v. Hammond (1872) LR 7 Ex 218: The Court of Exchequer ruled that executors of a deceased partner receiving annuity payments out of profits were not partners and bore no personal liability for debts incurred by surviving partners.
  • Addanki Narayanappa v. Bhaskara Krishtappa AIR 1966 SC 1300: The Supreme Court traced the historical protections afforded to the legal heirs and surviving estates of partners upon dissolution or death under Chapter XI and the 1932 Act.
  • I.R.C. v. Lebus's Executors [1946] 1 All ER 476: Established that an annuity paid to a partner's widow out of business profits does not give her an ownership interest or make her liable as a partner.
Courtroom Practice & Strategic Litigation Guidance:

When structuring succession clauses in partnership deeds, draft annuity provisions for surviving spouses or children with express reference to Section 6 Explanation 2(c) of IPA 1932, clarifying that receipt of annuities creates no partner liabilities or creditor exposure.

Section 75 All 266 Sections of Indian Contract Act Section 77