Partnership Business and Breach of Trust

Published by The Daily Star | February 23, 2024;  (Link Here)

This week Your Advocate is Barrister Omar Khan Joy, Advocate, Supreme Court of Bangladesh. He is the head of the chambers of a renowned law firm, namely, ‘Legal Counsel’, which has expertise mainly in commercial law, family law, labor law, land law, constitutional law, criminal law, and IPR.

Query
Google News LinkFor all latest news, follow The Daily Star’s Google News channel.I have a partnership firm with five of my childhood friends and we have been selling clothes on an online platform for the past two years, which has been going well. My friend, Jamil, handles the accounts and most of the monetary transactions. Recently, I found out that he has been making secret profits by selling t-shirts (bought with the partnerships funds) privately. Can we legally hold him accountable to reimburse the money he used up to purchase the t-shirts?

Response|
Thank you for your query.

A partnership is a business formed by two or more people who have agreed to share the profits made. Habitually, one of the partners manages the business operations on behalf of the others while different partners may mange different portfolio of the business. The work distributions are generally incorporated within the partnership agreement itself.

It is understood that you run a partnership business with five of your friends and sell clothes online. One of the partners, Mr. Jamil, is responsible for handling the accounts and majority of the financial transactions. Unfortunately, you have recently discovered that Mr. Jamil has been secretly making profits by selling t-shirts which were bought using funds from the partnership capital.

Unless there is an embargo in the partnership agreement on the partners in relation to engaging into competing businesses, the very fact of selling clothes online by one of the partners, Mr. Jamil, cannot be legally objected. However, the fact that he has used up the partnership funds for his own business is certainly an illegal move by him. By doing so, he has already committed several criminal offences like, criminal breach of trust, theft, misappropriation etc. and following a successful litigation, he may be imprisoned for the same.

On one hand, you can bring a claim against your friend, Mr. Jamil, to the Civil Court due to a breach of contract resulting from a breach of the Partnership Agreement that you formed at the inception of the business. Consequently, your friend, Mr Jamil, may be held liable to pay damages for the secret profits that he had made using the partnership capital. While on the other hand, you could institute a strong criminal case under the Penal Code 1860.

Nevertheless, it is imperative to understand that pursuing legal actions at the initial stage may not be the wisest of decisions and may not be practically viable. Accordingly, I would advise you to raise the concern formally with him and other partners with a view to determining the next course of action including recovery of money and Mr. Jamil’s continuity in the partnership business. If you cannot reach an amicable solution, you may choose to serve him a legal notice for recovery of the money while litigation always remains as an option.

I hope my answer provides you a solution to the issue in your query.

The writer may be contacted at

omar@legalcounselbd.com