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Section 258: Sections 239 to 266 [Repealed by the Indian Partnership Act, 1932]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 258

Section 258 historically enacted the strict fiduciary rule requiring a partner to account for and surrender to the firm any personal benefit or secret profit derived from any transaction concerning the firm or from the use of the partnership property or commercial name, now reenacted as Section 16(a) of the Indian Partnership Act, 1932.

  • Strict Fiduciary Accountability for Secret Profits: A partner who leverages his position, information, or connection with the firm to secure a personal commission, rebate, or financial windfall must account for the entire benefit to the firm.
  • Constructive Trust Over Misappropriated Benefits: Equity treats any personal profit derived from the exploitation of partnership property, goodwill, or commercial opportunities as held on constructive trust for the benefit of all partners.
  • Modern Codification in Section 16(a) IPA 1932: Repealed by Act 9 of 1932 and reenacted as Section 16(a) of the Indian Partnership Act, 1932, governing internal partnership accounting and recovery actions.
Key Landmark Precedents:
  • Bentley v. Craven (1853) 18 Beav 75: The foundational authority holding that a partner employed to buy sugar for the firm who secretly supplied his own sugar bought at a lower price was bound to account to the firm for the profit made.
  • Boardman v. Phipps [1967] 2 AC 46: Affirmed in Indian law: fiduciaries who acquire information or profit-making opportunities through their representative status must account for all resultant profits.
  • Kavita Trehan v. Balsara Hygiene Products Ltd. (1994) 5 SCC 380: The Supreme Court recognized the inherent equitable jurisdiction of Indian civil courts to compel the restitution of benefits derived through breach of fiduciary trust.
Courtroom Practice & Strategic Litigation Guidance:

When a managing partner diverts supplier rebates, trade discounts, or procurement commissions into private bank accounts, file a suit under Order XX Rule 16 CPC invoking Section 16(a) of IPA 1932 for a preliminary decree for accounts, seeking inspection and freezing of the partner's illicit accounts.

Section 75 All 266 Sections of Indian Contract Act Section 77