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Section 259: Sections 239 to 266 [Repealed by the Indian Partnership Act, 1932]

Indian Contract Act • Official Statutory Text & Practice Guide

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

Legal Commentary & Landmark Judgments: Section 259

Section 259 historically prohibited a partner from carrying on any business of the same nature as, and competing with, that of the firm without the consent of co-partners, mandating full disgorgement of all competing profits, now reenacted as Section 16(b) of the Indian Partnership Act, 1932.

  • Statutory Non-Competition Obligation: During the subsistence of the partnership, every partner is prohibited from conducting a rival or competing commercial enterprise of the same nature without co-partners' express consent.
  • Disgorgement of All Competing Profits: The delinquent partner must account for and pay over to the firm all profits made by him in the competing business; however, the firm bears no liability for any losses incurred in the rival business.
  • Modern Codification in Section 16(b) IPA 1932: Repealed by Act 9 of 1932 and reenacted as Section 16(b) of the Indian Partnership Act, 1932, operating as an exception to the general restraint of trade rule in Section 27 of the Contract Act.
Key Landmark Precedents:
  • Aas v. Benham [1891] 2 Ch 244: The Court of Appeal held that a partner is liable to account for profits only if the competing business is of the same nature and within the scope of the partnership's existing commercial enterprise.
  • Trimble v. Goldberg [1906] AC 494: The Privy Council established that a partner who buys property independently is not bound to account unless the transaction fell within the exact scope of the firm's business or conflicted with its interests.
  • Gujarat Bottling Co. Ltd. v. Coca Cola Co. (1995) 5 SCC 545: The Supreme Court held that negative non-compete covenants operating during the subsistence of a commercial partnership or agreement do not violate Section 27 of the Contract Act.
Courtroom Practice & Strategic Litigation Guidance:

In litigation against a rogue partner operating a parallel competing venture, cite Section 16(b) of IPA 1932 and Section 27 Contract Act exception. Pray for an interim injunction restraining commercial diversion alongside a preliminary decree for accounts of all competing profits.

Section 75 All 266 Sections of Indian Contract Act Section 77