Read the following passage and answer the question.

Rita, Sudha, and Nitu decided to do transport business in partnership. For this purpose, they did not prepare any deed. They introduced their capitals, ₹50,000, ₹60,000 and ₹40,000 respectively and commenced business from 1st April. On the same date, Nitu also provided ₹15,000 as a loan to the firm on the requirement. At the end of the first financial year, the firm earned a net profit of ₹10,000 (excluding interest on loan). Nitu asked for interest on the loan at 10% p.a, while Sudha asked for interest on capital at 5% p.a. But for both terms, Rita did not agree. 

In the absence of partnership deed, which of the following Act is applicable?

The Indian Partnership Act- 1932

The correct answer is option 3- The Indian Partnership Act- 1932

Since there is no partnership deed, provisions of the Indian Partnership Act, 1932 will apply.

Normally, the partnership deed covers all matters affecting relationship of partners amongst themselves. However, if there is no express agreement on certain matters, the provisions of the Indian Partnership Act, 1932 shall apply.