Partnership Act, 1932 — section 6

6. Mode of determining existence of partnership..—In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Explanation 1.—The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners. Explanation 2.—The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business ; and in particular, the receipt of such share or payment

(a)by a lender of money to persons engaged or about to engage in any business,

(b)by a servant or agent as remuneration,

(c)by the widow or child of a deceased partner, as annunity, or

(d)by a previous owner or part owner of the business, as consideration for the sale of the goodwill or share thereof, does not of itself make the receiver a partner with the persons carrying on the business. 1[6A. Act not to apply to certain relationships.— Nothing contained in this Act not to apply to certain relationships. Nothing contained in this Act shall apply to a relationship created by any agreement between a banking company and a person or group of persons providing for sharing of profit and losses arising from or relating to the provision by the banking company of finance to such person or group of persons. Explanation. For the purposes of this section, “banking company” “and finance” shall have the same meaning as in the banking Tribunals Ordinance, 1984.]