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The Propositions are: (I) Where a partner of a professional or business partnership borrows money in…

Under the Indian Partnership Act, 1932, the firm is liable where a partner borrowing money in the usual course of business for the firm's purposes instead misappropriates…

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The Propositions are:
(I) Where a partner of a professional or business partnership borrows money in the usual and regular course of business stating that the money is to be used for partnership business but misappropriates it, the other partners shall be liable.
(II) Where money has been borrowed by a partner without authority, but has been applied to the legitimate business needs of the firm, the firm is liable.
(III) Where the act is within the scope of the implied authority of a partner, but it has been done by him, to the knowledge of the third party, not for the firm but for his own purposes, the firm is liable.
Which of the following is true in accordance with Indian Partnership Act, 1932 as to the aforesaid propositions?

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Answer and explanation

Correct answer B

Under the Indian Partnership Act, 1932, the firm is liable where a partner borrowing money in the usual course of business for the firm's purposes instead misappropriates it, and also where an unauthorised borrowing is actually applied to the firm's legitimate needs, but not where the third party knew the partner was acting for himself rather than for the firm despite the act falling within his implied authority.

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