Prepared by Assist. Professor Rekha Khandelwal
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Partnership Act, 1932- Chapter – VI – Dissolution of A Firm
39. Dissolution of a firm. –
- The dissolution of the partnership among all the partners of the firm is called the dissolution of the firm.
40. Dissolution by agreement. –
- A firm may be dissolved with the consent of all the partners or It may be dissolved in accordance with a contract between the partners.
41. Compulsory dissolution. –
- A firm is dissolved,
(a) by the adjudication of all the parters as insolvent or by the adjudication of all the parters as insolvent except one,
(b) by the happening of any incident which makes it unlawful for the business of the firm to continue or for the partners to conduct it on partnership.
But, where more than one separate adventure or undertaking is carried on by the firm, the illegality of one or more shall not cause the dissolution of the firm in respect of its lawful adventures and undertakings.
42. Dissolution on the happening of certain contingencies. –
- Subject to contract between the partners a firm is dissolved,
(a) if partnership is constituted for a fixed term, by the expiration of that term.
(b) if partnership is constituted to carry out one or more adventures or undertakings, by its completion.
(c) by the death of a partner.
(d) by the judgementof a partner as an insolvent.
43. Dissolution by notice of partnership at will. –
(1)Where the partnership is at will, the firm may be dissolved by any partner giving a notice of his intention to dissolve the firm in writing to all the other partners.
(2) The firm is dissolved from the date which is mentioned in the notice as the date of dissolution of firm or if no date is mentioned so, then the firm is dissolved from the date of the communication of the notice.
44. Dissolution by the Court. –
Upon a partner’s claim, the court may dissolve the firm for any of the following reasons, namely.
- (a) that a partner has become of unsound mind, in this case the suit may be brought by the next friend of the partner (unsound mind) as by any other partner.
- (b) that a partner other than the partner claiming has become in any way permanently incapable of performing his duties as partner;
- (c) that a partner other than the partner claiming, is guilty of conduct that affects the conduct of the business transaction in a biased manner, taking into account the nature of the business.
- (d) that a partner, other than the partner claiming, wilfully or persistently violates the firm’s affairs or contracts related to the conduct of its business or otherwise manages itself in matters relating to the business that it is not reasonably practicable for the other partners to conduct the business in partnership with him.
- (e) that a partner, other than the partner claiming has in any way transferred his interest in the firm to a third party, or is allowed to charge his share under the provisions of rule 49 of Order 21 of the First Schedule to the Code of Civil Procedure, 1908 (5 of 1908), or has allowed the sale of arrears of land-revenue or any arrears of land-arrears by the partner.
- (f) that the business of the firm cannot be run without any loss.
- (g) on any other ground that makes it just and equitable that the firm should be dissolved.