Section 29 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 29 deals with what happens when a partner transfers his interest in the firm, whether by outright transfer, by mortgage, or by creating a charge on it. During the life of the firm, the transferee gets only the transferring partner's share of profits. If the firm is dissolved or the transferring partner ceases to be a partner, the transferee can claim that partner's share of the assets and an account from the date of dissolution.
A partner may transfer his interest in the firm absolutely, by mortgage or by charge, but, during the continuance of the firm, the transferee cannot interfere in the conduct of the business, require accounts or inspect the books. He is entitled only to receive the share of profits of the transferring partner and must accept the account of profits agreed to by the partners (29(1)). If the firm is dissolved, or the transferring partner ceases to be a partner, the transferee is entitled, against the remaining partners, to the share of the assets to which the transferring partner is entitled, and to an account from the date of the dissolution to work out that share (29(2)).
Section 29(1): while the firm continues
What is covered
The sub-section covers a transfer by a partner of his interest in the firm, in any of three forms:
- absolute transfer (an outright transfer);
- by mortgage; or
- by the creation of a charge on the interest.
The person who receives the interest is the transferee.
What the transferee cannot do
During the continuance of the firm, the transfer does not entitle the transferee to:
| Not entitled to | Text |
|---|---|
| Interfere in the conduct of the business | Stated |
| Require accounts | Stated |
| Inspect the books of the firm | Stated |
This contrasts with the rights of a partner under section 12, which include taking part in the business and inspecting and copying the books. The transferee is not made a partner by the transfer. The text does not make him one; it gives him only the rights listed.
What the transferee can do
The transferee is entitled only to receive the share of profits of the transferring partner. And the transferee shall accept the account of profits agreed to by the partners. So he cannot demand a fresh account, and he is bound by the profit figure the partners themselves have agreed.
Example. Sandeep is a partner with a 40 per cent share in a trading firm. He mortgages his interest in the firm to a lender, Tanya, for a loan. While the firm runs, Tanya cannot attend partners' meetings, cannot demand the books and cannot ask to see accounts. If the partners agree that the profit for the year is Rs 10 lakh, Sandeep's 40 per cent share is Rs 4 lakh, and Tanya receives that share of profits, not more, and must accept the agreed account.
For a firm that is worried about a partner pledging or selling his stake, a short legal consultation can help you check what your deed says and how section 29 would apply.
Section 29(2): on dissolution or when the partner ceases to be a partner
If the firm is dissolved, or the transferring partner ceases to be a partner, the transferee is entitled, as against the remaining partners:
| Right | Text |
|---|---|
| Share of assets | To receive the share of the assets of the firm to which the transferring partner is entitled |
| Account | For the purpose of ascertaining that share, to an account as from the date of the dissolution |
Points to note:
- Two triggers. Dissolution of the firm, or the transferring partner ceasing to be a partner. The text does not list the ways a partner may cease to be one; they are dealt with later in the Act, for example section 32 on retirement and sections 33 and 34 on expulsion and insolvency.
- Against the remaining partners. The claim is against the other partners, who stay in the firm.
- Account from the date of dissolution. The text says "as from the date of the dissolution" even though the second trigger is the partner ceasing to be a partner; it does not spell out the date for that case. Check the official text and take advice where the date matters.
- Only the transferor's share. The transferee gets what the transferring partner would have got, not a larger claim.
Example. Continuing the example, the firm is dissolved two years later. Tanya can claim from the remaining partners the share of the assets to which Sandeep is entitled, and can ask for an account from the date of dissolution to work out that share. How accounts are settled generally is in section 48 of the Act.
Can the deed change this?
Section 29 does not open with "subject to contract between the partners". It is also not a rule about the relations of the partners alone: it fixes what an outsider, the transferee, may and may not do. A deed can still deal with the topic indirectly, for example by requiring the other partners' consent before any partner transfers or charges his interest. The text of section 29 does not say that such a clause binds the transferee. Check the deed and the official text, and take advice before relying on a restriction.
Becoming a partner is a different matter, dealt with in section 31.
Practical points
- A transferee is not a partner. He has no right to manage the firm or to see its books during the firm's life.
- Lenders should know this. A lender who takes a charge on a partner's interest gets a claim on the profit share and later on the asset share, not a say in the business.
- Agree profit accounts clearly. The transferee must accept the account of profits agreed to by the partners, so the firm should keep proper accounts.
- Tax treatment of a transfer is a separate subject; see our income-tax guides.
Need help if a partner wants to transfer his interest?
Whether you are a partner worried about a colleague's transfer, a lender taking a charge, or a buyer of a partner's interest, the position under section 29 is narrower than many expect. Our legal consultation service can review your deed and documents and explain what rights exist and when.
Key takeaways
- A partner may transfer his interest absolutely, by mortgage, or by creating a charge on it.
- During the firm, the transferee gets only the transferring partner's share of profits, with no say in business, accounts or inspection of books.
- The transferee must accept the account of profits agreed to by the partners.
- On dissolution, or when the transferring partner ceases to be a partner, the transferee is entitled against the remaining partners to the transferor's share of assets, with an account from the date of dissolution.
- Section 29 is not stated to be subject to contract between the partners.
Read next
- Section 28: holding out
- Section 30: minors admitted to the benefits of partnership
- Section 48: settlement of accounts between partners
- Rights of partners under the Partnership Act
Disclaimer: Based on the text of the Indian Partnership Act, 1932 as consulted on 1 October 2026. Several States have amended the registration chapter and make their own rules, forms and fees for the Registrar of Firms. This article is general information, not legal advice; check the official text and your State's rules before acting.