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Indian Partnership Act 1932
Implied Authority of Partners as Agent of the Firm Section 19

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Implied Authority of Partners as Agent of the Firm Section 19
Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm.

The authority of a partner to bind the firm conferred by this section is called his “implied authority”.

Sections 19(1) and 22 deal with the implied authority of a partner. The impact of these Sections is that the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm binds the firm, provided that the act is done in the firm name, or any manner expressing or implying an intention to bind the firm. Such an authority of a partner to bind the firm is called his implied authority. It is however subject to the following restrictions:
1. The act done must relate to the usual business of the firm, that is, the act done by the partner must be within the scope of his authority and related to the normal business of the firm.
2. The act is such as is done for normal conduct of business of the firm. The usual way of carrying on the business will depend on the nature and circumstances of each particular case [Section 19(1)].
3. The act to be done in the name of the firm or in any other manner expressing or implying an intention to bind the firm (Section 22).
In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to-
i. Submit a dispute relating to the business of the firm to arbitration;
ii. open a banking account on behalf of the firm in his own name;
iii. compromise or relinquish any claim or portion of a claim by the firm;
iv. withdraw a suit or proceedings filed on behalf of the firm;
v. admit any liability in a suit or proceedings against the firm;
vi. acquire immovable property on behalf of the firm;
vii. transfer immovable property belonging to the firm; and
viii. enter into partnership on behalf of the firm.
Mode of Doing Act to Bind Firm (Section 22) In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm name, or in any other manner expressing or implying an intention to bind the firm.

Extension and Restriction of Partners’ Implied Authority (Section 20)

The partners in a firm may, by contract between the partners, extend or restrict implied authority of any partners.

Any act done by a partner on behalf of the firm which falls within his implied authority binds the firm, unless:
the person with whom he is dealing knows of the restriction or
does not know or believe that partner to be a partner.
Therefore, the restrictions imposed on the implied authority of a partner by agreement shall be effective against a third party only when the above conditions are satisfied.