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Section 244: Sections 239 to 266 [Repealed by the Indian Partnership Act, 1932]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 244

Section 244 historically codified the fundamental doctrine of partnership by estoppel or 'holding out', rendering liable any person who knowingly leads another to believe he is a partner, now modernized and reenacted as Section 28 of the Indian Partnership Act, 1932.

  • Doctrine of Holding Out: A person who by words, spoken or written, or by conduct, represents himself or knowingly allows himself to be represented as a partner is estopped from denying that status against anyone who extended credit on that faith.
  • Requisite Extension of Credit: The third party seeking to enforce liability must establish that he contracted or extended credit in actual reliance upon the representation, believing the representor to be a partner.
  • Evolution into Section 28 IPA 1932: Repealed by Act 9 of 1932 and expanded into Section 28 of the Indian Partnership Act, 1932, anchoring modern commercial estoppel across joint ventures and unincorporated syndicates.
Key Landmark Precedents:
  • Scarf v. Jardine (1882) 7 App Cas 345: The House of Lords established that where an erstwhile partner retires without notice and allows the firm to continue using his name, he is liable on the ground of holding out under Section 244 principles to old customers dealing with the reconstituted firm.
  • Bevan v. National Bank Ltd. (1906) 23 TLR 65: Affirmed that permitting one's name to appear in the firm name or on commercial stationery amounts to holding out, rendering the individual liable to creditors extending credit in reliance thereon.
  • CIT v. Bagyalakshmi & Co. AIR 1965 SC 1708: The Supreme Court recognized that holding out creates a personal estoppel against the individual but does not confer actual proprietary partnership rights or membership in the firm.
Courtroom Practice & Strategic Litigation Guidance:

In creditor recovery proceedings, join any non-partner who permitted his name to be used on firm invoices, tender documents, or bank guarantees, pleading estoppel under Section 28 of IPA 1932. In defense, demonstrate that the creditor had actual knowledge of the non-partner status before extending credit.

Section 75 All 266 Sections of Indian Contract Act Section 77