Whether a company can enter into a partnership or not is no longer open to doubt. The Deptt.

of Company Affairs has in its Circular No. 1-81 (20-1-81-CL-V), dated 14-9-1981 expressed
the following view: "A question has been raised whether an incorporated company can enter
into a partnership with some other person or some other company. The matter has been
examined by this department in consultation with the Department of Legal Affairs and I am
directed to say that prima facie a company entering into a partnership with some other person
or some other company would be ultra vires and will be against the principle that a particular
company or an incorporated body cannot lawfully employ funds for purposes not authorised
by its constitution which would normally be the memorandum and the articles of association.
However, a company or an incorporated body, if so authorised by its constitution, can enter
into partnership with an individual person or with another company irrespective of nationality
and residence. This would, however, require the company to adopt very special articles since
many of the provisions of the Partnership Act would be difficult to apply to such a
partnership. In view of this, while considering applications for registration of firms with
bodies corporate as partners under the Indian Partnership Act, 1932, the State Governments
should examine the applications before them and find out whether the memorandum and
articles of association of the applicant incorporated companies contain any special articles
which authorise the incorporated companies to enter into partnerships and the articles also
take care of the possible anomalies which have been pointed out in the Calcutta High Court's
ruling in the case of Ganga Metal Refining Company P. Ltd. v. Income-tax Commissioner
West Bengal, (1968) 38 Com Cases 117 : AIR 1967 Cal 429.

the great authority of Lindley on Partnership 10th Edn. at p. 100 formulates the law thus:

"There is no general principle of law which prevents a corporation from being a partner with
another corporation or with ordinary individuals, except the principle that a corporation
cannot lawfully employ its funds for purposes not authorised by its constitution. Having
regard, however, to this principle, it may be considered as prima facie ultra vires for an
incorporated company to enter into partnership with other persons."

It follows that this classical authority on the law of partnership is of the view that prima facie
a company entering into a partnership with some other person or some other company would
be ultra vires and will be against the principle that a particular company or an incorporated
body cannot lawfully employ funds for purposes not authorised by its constitution which
would be normally the Memorandum and the Articles of Association. This difficulty is
recognised in 28 Hals. (Simonds 3rd Edn) P. 499 Article 959. It has been pointed out there
that a Corporation if so authorised by its constitution can enter into partnership with an
individual person or with another Corporation whatever may be its nationality and wherever
it may be situate. Such a partnership however would require very special articles since many
of the provisions of the Partnership Act would be difficult to apply.