Explain the grounds and procedures for the dissolution of a partnership firm

as outlined in the Indian Partnership Act

CONTRACT LAW

[An assignment submitted to Himachal Pradesh National Law University, Shimla]

COURSE INCHARAGE: Dr. Bineet Singh NAME: Rashika Singh

BBALLB(3rd Semester)

En. No. : 1120220068

HIMACHAL PRADESH NATIONAL LAW UNIVERSITY, SHIMLA

16 MILE, SHIMLA-MANDI NATIONAL HIGHWAY, GHANDAL

DISTRICT SHIMLA, HIMACHAL PRADESH-171014

Ph. 0177-2779802, 0177-2779803, Fax: 0177-2779802

Website: http://hpnlu.ac.in

1
 DECLARATION

I, Rashika Singh, am delighted to submit the original manuscript of the assignment titled

“Explain the grounds and procedures for the dissolution of a partnership firm as outlined in the
Indian Partnership Act”.

I hereby declare that the manuscript is an original document and an unpublished work by me.
Due credit has been given to the authors whose content has been used for the purpose of
research. I agree to deal with any issue related to this document, including copyright, defamation
or contempt and agree to suffer the loss, if any, caused by violating any rights.

2
 ACKNOWLEDGEMENTS

I am using this opportunity to thank all those who helped me throughout the completion of the
assignment.

I would to thank my teacher Dr. Bineet Singh, for giving me this opportunity to work on this
assignment which helped me to do a lot of research and helped me learn new things. I got to
know a lot about the topic and various details associated with it. By working on this assignment,
I got to understand the Topic of Explain the grounds and procedures for the dissolution of a
partnership firm as outlined in the Indian Partnership Act.

I also extend my sincere thanks to the Vice Chancellor of Himachal Pradesh National Law
University, Prof. Dr. Nishtha Jaswal for making resources available in order to complete this
assignment. I would like to thank the supportive staff at the Himachal Pradesh National Law
University, who gave me the permission and assistance in accessing the equipment required for
the successful completion of the assignment. This assignment could never have been possible
without the support of everyone who has helped me throughout. I would like to extend gratitude
to my parents and friends who guided me throughout the completion of the assignment

3
 TABLE OF CONTENTS

Cover Page …………………………………………………………………………1

Declaration …………………………………………………………………………2

Acknowledgements ………………………………………………………………..3

Introduction ………………………………………………………………………..5

Modes of dissolution of a firm……...……………………………………………...5

Rights of partner on dissolution of a firm……...……………………………..…..18

Liabilities of partner on dissolution of a firm……...……………………………..18

4
 INTRODUCTION

Dissolution means the complete breakdown of the relations of partnership between all partners. It
is not the severance of the connection of one partner with the firm but the severance of
partnership relations between all the partners. According to Section 39, The dissolution of
partnership between all the partners of a firm is called the "Dissolution of the Firm" 1. The firm is
dissolved when all the partners stop carrying on the partnership business. If some partners
dissociate from the firm and the remaining partners continue the business of the firm, the firm is
not dissolved. It is clear from this definition that so far as the partnership between all the partners
exists, a firm is not dissolved. Where in a firm, two partners constitute a partnership business,
and any one of them leaves the partnership, dissolution of the firm takes place. The dissolution of
a firm is distinct from the retirement of a partner because, in the latter situation, others or
remaining partners continue the business of the firm, and the firm is not dissolved. Thus, the
dissolution of partnership between all the partners of a firm is called dissolution of the firm 2.

The Dissolution of firm means the discontinuation of the jural relation existing between all the
partners of the firm. In the case where more than two partners are constituted into a partnership
business and any one of them retires or becomes incapacitated from acting as a partner due to
death, insolvency, or insanity, the partnership, i.e., the relationship between such a partner and
other is dissolved, but the remaining two partners may decide to continue the partnership firm
and can save the firm from dissolution.

MODES OF DISSOLUTION OF A FIRM

According to Indian Partnership Act, a partnership may be dissolved in any of the following
modes :

1. Dissolution by agreement, (section 40)

2. Compulsory dissolution, (section 41)
3. Contingent dissolution, (section 42)
4. Dissolution by notice, (section 43)

1
The Indian Partnership Act, 1932, S. 39.
2
Dissolution of Partnership Firm | Essays, Research Papers and Articles on Business Management.
https://www.businessmanagementideas.com/tag/dissolution-of-partnership-firm

5
 5. Dissolution by the court, (section 44)

Modes of Dissolution of Firm

Without Intervention of Court By Intervention of Court

(Sec. 40-43) (Sec. 44)

1. By without intervention of court

1.1. Dissolution by agreement
According to Section 40, a firm may be dissolved with the consent of all the partners or
in accordance with a contract between the partners 3. Actually Section 40 contains two
types modes of dissolution. They are as follows:
a. First, a firm may be dissolved with the consent of all the partners. It means firm can
be dissolved at any time by a subsequent consent between all the partners. This rule
applies even though the partnership agreement is (a) for a fixed term and the same
has not yet expired, or
b. Secondly, a firm may be dissolved in accordance with a contract between the
partners. This contract may either be in partnership deed itself or any other contract
between the partners.
1.2. Compulsory Dissolution

Compulsory dissolution.—A firm is dissolved,—

a. by the adjudication of all the partners or of all the partners but one as insolvent, or
b. by the happening of any event which makes it unlawful for the business of the
firm to be carried on or for the partners to carry it on in partnership:

3
The Indian Partnership Act, 1932, S. 40.

6
 Provided that, where more than one separate adventure or undertaking is carried on by
the firm the illegality of one or more shall not of itself cause the dissolution of the firm in
respect of its lawful adventures and undertakings4.
According to section 41, Compulsory dissolution of a firm may take place on the
following two circumstances:
a. Insolvency of partners
b. Business becomes lawful
Let’s discuss both of them.
a. Insolvency of partners
When all the partners are adjudicated insolvent, the firm comes to an end. When all
the partners or all except one are adjudicated insolvent, the firm is compulsorily
dissolved. Insolvency is a fact that attaches disability to entering into contractual
relations amongst the partners themselves or between any insolvent partner and a
third person and, therefore, the business cannot be transacted. Solvency of only one
partner disables him to run partnership alone as the partnership always exists between
two or more persons.
b. Business becomes lawful
If the partnership business is not unlawful from the very beginning but later on due to
some event it becomes unlawful to carry on the business, the partnership is dissolved.
Sometimes, it may not be unlawful to carry on the business by a single individual but
it may become unlawful to carry on the business in partnership. In such an event also,
the partnership is dissolved. The law may prohibit carrying on a business or the law
may provide the business to be carried on by individual not by the partners and in
either of these two cases, the partnership dissolves. Another situation is when the
performance of contract becomes impossible or the object of contract is frustrated
(Section 56).
The proviso to Section 41 protects the adventures and undertakings which have not
become unlawful when the firm carries on more than one separate adventures or
undertakings because the illegality of one or more shall not cause itself the
dissolution of the firm in respect of its lawful adventures and undertakings 5. The firm,
4
The Indian Partnership Act, 1932, S. 41.
5
The Indian Partnership Act, 1932, S. 41.

7
 thus, remains survived in respect of the adventures or undertakings which are lawful
and it has to drop the adventures or undertakings that have become unlawful.

1.3. Contingent dissolution

Contingent dissolution is provided by Section 42:
42. Dissolution on the happening of certain contingencies.- Subject to contract between
the partners a firm is dissolved,-
(a) if constituted for a fixed term, by the expiry of that term;
(b) if constituted to carry out one or more adventures or undertakings, by
the completion thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent6.
Thus the contingent dissolution take place by:
a. Expiry of the term of the firm
b. Completion of adventures or undertakings
c. Death of a partner
d. Insolvency of a partner

Let’s discuss each of them one by one.

a. Expiry of the term of the firm
When the firm is for a definite term, it is dissolved on the expiry of the term. This is
subject to the contract to the contrary i.e., the agreement may provide the partnership
to continue even after the expiry of the term. If the partners after the expiry of the
term consent to refer their disputes to arbitration that does not mean an agreement to
the contrary7. If a partnership has been constituted for a fixed term with an option to a
partner to dissolve it by giving a notice of a specified period, any other mode of
dissolution by agreement needs to be strictly proved8.

b. Completion of adventures or undertakings

6
The Indian Partnership Act, 1932, S. 42.
7
Saligram Ruplal khanna v. Kumar Rajnath, AIR 1974 SC 1094.
8
Ramanujachary v. Pohoomal, 1956 Bom. 358, 359.

8
 When the partnership is constituted for carrying out one or more adventures or
undertakings, the firm is dissolved by the completion thereof. This is also subject to
the contract to the contrary. By virtue of Section 42(b), the term terminus ad quem of
a firm may be inferred from the nature of adventure or undertaking although the firm
has not been constituted for a fixed term. For it, the terms of agreement between the
partners, their conduct and the nature of undertaking or adventure have to be taken
into account and if it is found that the partnership was formed to carry on only one
undertaking, the firm is dissolved on its completion. In other words, a partnership for
a particular purpose continues till the purpose is served and not after that, except
where the partners have contracted that after such purpose is served, the partnership
shall continue for any other purpose that they might agreed. Because a partner cannot
be forced to employ his money, labour or skill in a pursuit against his will, but when
the partners install flour, sugar, oil mill etc. the question of completion of the
undertaking does not arise and in such cases Section 42 (b) will not apply.
In Gherulal Parakh v. Mahadeodas Maiya9, Supreme Court held that the firm was not
immediately dissolved, after the supply of a part of goods and the contract was
terminated before time. But it would be dissolved only after the realisation of the
assets.

c. Death of a Partner
Subject to contract between the partners a firm is dissolved by the death of a partner 10.
In other words, a partnership immediately gets dissolved upon the death of a partner,
unless there is a contract to the contrary. This rule applies even though the partnership
is for a fixed term and same has not expired, or it is for a particular adventure or
undertaking and the same has not yet been completed or it is partnership at will. Thus
on the death of a partner the firm is dissolved provided that there is no contract to the
contrary between partners. If the surviving or remaining partners continue the
business of the firm, in such cases, it will be deemed that a new firm comes into
existence by mutual consent11.
9
A.I.R. 1959 S.C. 781.
10
The Indian Partnership Act, 1932, S. 42(c).
11
M/s Nandlal Sohanlal, Jullunder v. The Commissioner of Income Tax, Patiala, AIR, 1977 P& H 320 at p. 324
(F.B.).

9
 In the case of Commissioner of Income Tax v. Govind Ram Sugar Mills12, the
Supreme Court observed that Section 42 (c) of the Partnership Act can appropriately
be applied to a partnership consisting of more than two partners. If one of them dies,
the partnership is dissolved, but if there is a contract to the contrary between the
partners, the surviving or remaining partners will continue the business of the firm.
On the other hand, if there are only two partners the only result of either's death will
necessarily be the dissolution of the firm and there is no scope for applying Section
42 (c) in such situation. However, it may be noted that pursuant to the wishes or the
directions of the deceased partner, the surviving partners may entered into a new
partnership with the heirs of the deceased partner, but it would be a new
partnership between them.

d. Insolvency of a partner
Subject to contract between the partners in a firm is dissolved by the adjudication of a
partner as an insolvent13. Similarly this rule applies even though partnership is for a
fixed term and the term has yet not expired or is constituted for a particular adventure
or undertaking and the same has not yet been completed or it is a partnership at will.
It may be noted that where a partnership was formed for a fixed term or for carrying
out a particular adventure or undertaking the death or insolvency does not dissolve
the partnership firm, unless there is any contract to the contrary14.

1.4. Dissolution by notice

Dissolution by notice is provided in Section 43 as under-
43. Dissolution by notice of partnership at will.-
(1) Where the partnership is at will, the firm may be dissolved by any partner giving
notice in writing to all the other partners of his intention to dissolve the firm.
(2) The firm is dissolved as from the date mentioned in the notice as the date of
dissolution or, if no date is so mentioned, as from the date of the communication of the
notice.

12
A.I.R. 1996 S.C. 24.
13
The Indian Partnership Act, 1932, S. 42(d).
14
Abdul Azees v. M.K.P. Kadar Mohideen, AIR 1963, SC 1165.

10
 For dissolution by notice, it is necessary that-
(i) The partnership must be at will.
(ii) Any partner must give a notice in writing to all other partners of his intention to
dissolve the firm.
(iii) The notice must be communicated to all the partners.
(iv) The notice must be explicit and final15.

The dissolution of a partnership at will may also be inferred from the circumstances of
the case even without any notice of intention to dissolve the firm. When there is a
quarrel between the partners, an inference can be drawn that the partnership at will has
terminated16.
The firm is dissolved from the date mentioned in the notice. If no such date has been
mentioned, the firm is dissolved from the date of the communication of notice. When a
plaint for dissolution of the firm is filed, no notice is needed because when the summons
are communicated by the court to all the partners, the firm is dissolved although the
plaint is not equal to notice. The dissolution of the firm will take place on the last service
of summons to the partners17.
2. By intervention of court
2.1. Dissolution by the court
Dissolution by the court is provided in Section 44 as under-
44. Dissolution by the Court. At the suit of a partner, the Court may dissolve a firm on
any of the following grounds, namely,
(a) that a partner has become of unsound mind, in which case the suit may be
brought as well by the next friend of the partner who has become of
unsound mind as by any other partner;
(b) that a partner, other than the partner suing, has become in any way
permanently incapable of performing his duties as partner;

15
Banwari Lal v. Roop Kishore, 1945 All 332; C.S. Oswal v. R.V. Dixit, AIR 1956 Nag 46.
16
Pearce v. Lindsay, (1866) 46 ER 591.
17
Banarsi Das v. Kanshi Ram, AIR 1963 SC 1165

11
 (c) that a partner, other than the partner suing, is guilty of conduct which is
likely to affect prejudicially the carrying on of the business, regard being
had to the nature of the business
(d) that a partner, other than the partner suing, wilfully ar persistently
commits breach of agreements relating to the management of the affairs of
the firm or the conduct of its business, or otherwise so conducts himself in
matters relating to the business that it is not reasonably practicable for the
other partners to carry on the business in partnership with him
(e) that a partner, other than the partner suing, has in am way transferred the
whole of his interest in the firm to a third party, or has allowed his share to
be charged under the provisio of Rule 49 of Order XXI of the First
Schedule to the Code of Cidl Procedure, 1908 (5 of 1908) or has allowed
to the sold in the recovery of arrears of land revenue or of any dues
recoverable as arrears of land revenue due by the partner,
(f) that the business of the firm cannot be carried on save at a loss; or
(g) on any other ground which renders it just and equitable that the firm
should be dissolved18.

Thus, the court may dissolve the firm on the following grounds

(i) Insanity
(ii) Incapability to perform duty
(iii) Misconduct
(iv) Wilful or persistent breach of agreements
(v) Transfer of interest to third party
(vi) Business at loss
(vii) Just and equitable

Let’s discuss them in detail

a. Insanity

18
The Indian Partnership Act, 1932, S. 44

12
 At the suit of a partner, the Court may dissolve a firm on the ground that a partner
has become of unsound mind, in which case the suit may well be brought as well
by the next friend of the partner who has become of unsound mind as by any other
partner19. As an individual with an unsound mind lacks the capacity to effectively
contribute to the operations of a partnership firm, it becomes imperative, both for
the benefit of the incapacitated individual and the other partners, to seek the
dissolution of the firm. Consequently, the legal representative or next friend of the
unsound partner, or any other partner, can initiate legal proceedings by filing a
suit, urging the court to order the dissolution of the partnership.
b. Incapability to perform duty
At the suit of a partner, the court may dissolve a firm on the ground that a partner
other than the partner suing, has become in any way permanently incapable of
performing his duties as partner20. If the inability is of a transient nature or does
not impede the fulfillment of a partner's responsibilities, the partnership firm
cannot be dissolved based on this reason. For example, if there is fracture of the
bone of hand or leg and there is every likelihood of it being rectified or where a
partner suffers from paralysis but he is improving speedily by treatment, 21 the firm
cannot be dissolved on this ground. In order to dissolve the firm, the incapacity
must be permanent.
c. Misconduct
At the suit of a partner, the court may dissolve a firm on the ground that a partner,
other than the partner suing, is guilty of conduct which is likely to affect
prejudicially the carrying on of the business regard being had to the nature of the
business22. The initial observation to make regarding Section 44 (c) is that if the
partner initiating the legal action is personally responsible for behavior that could
adversely impact the smooth operation of the business, the court will refrain from
issuing an order for the dissolution of the firm. As remarked by Lord Romilly in
Harrison v. Tenant, "No party is entitled to act improperly and then to say that the

19
The Indian Partnership Act, 1932, S. 44(a)
20
The Indian Partnership Act, 1932, S. 44(b)
21
Whitewell v. Arthur, (1865) 147 RR 73:55 ER 848.
22
The Indian Partnership Act, 1932, S. 44(c)

13
 conduct of the partners and their feelings towards each other are such that the
partnership can no longer be continued and certainly this court would not allow
any person so as to act and thus to take advantage of his own wrong."23
Another crucial aspect to consider in Section 44 (c) is that for the dissolution of
the firm on these grounds, it is imperative that the partner is engaged in conduct
that, considering the nature of the business, is likely to adversely impact its
operations. Mere detriment to the firm due to a partner's willful wrongful act is
not adequate cause for dissolution; there must be a direct link between the
misconduct and its potential harm to the ongoing business. For example, in a case,
a partner had become of unsound mind for some time and during this period, he
had attempted to commit suicide. The court held that since the partner had not
committed the wrongful act wilfully, the firm could not be dissolved on this
ground.24
It may also be noted that much depends on the nature of the business. In Snow v.
Milford,25 the partnership firm carried on the business of bankers. One of the
partners, Milford, in the firm was found guilty of engaging in extramarital affairs,
leading to his wife leaving him. In response, the other partners initiated legal
proceedings seeking the dissolution of the firm based on Milford's misconduct.
The court, however, dismissed the suit, reasoning that the act of adultery, while
morally condemnable, does not necessarily compromise the safety of a customer's
funds. The court emphasized that, generally, immoral conduct, such as adultery,
cannot serve as grounds for dissolving or expelling a partner.

The judgment highlighted that, in certain instances, the moral conduct of an

individual may indeed have a prejudicial impact on the firm's business. For
instance, in a scenario where two Doctors form a partnership to operate a clinic,
and one is found to be behaving immorally toward patients, it might warrant
dissolution. However, this reasoning does not apply universally, as in the case of

23
Harrison v. Tenant
24
Anon (1885-86) 2 K&J 441, 452 69 ER 855: 110 KR 308.
25
(1868) 18 LT 142.

14
 banking business where the moral conduct of a partner is unlikely to adversely
affect the firm's business.

Nonetheless, the court clarified that if the moral conduct of a partner, even if the
offense is less severe, is projected to have a prejudicial impact on the firm's
business, considering the nature of the business, the court may order the
dissolution of the firm. For example, if a partner in a firm of drapers, is found
without ticket and is convicted, the firm may be dissolved. 26 Similarly, if the
conduct of a partner is such that partners may lose faith in each other the firm may
be dissolved.27 So in the case when a partner is guilty of misappropriation of
firm's money.28
Where arbitration proceedings were sought for to settle serious disputes between
applicants and respondent in conduct of partnership business and allegations and
counter allegations were levelled by parties against each other, arbitration
proceedings ought to be settled to commence to adjudicate disputes and the
question whether partnership can be dissolved or not and Sections 44 (c) and (g)
of Partnership Act would apply ought to be settled by arbitrator and till then court
cannot restrain applicants from carrying on business of the firm.29

d. Wilful and persistent breach of agreements

At the suit of a partner, the court may dissolve a firm on the ground that a partner,
other than the partner suing, wilfully or persistently commits breach of
agreements relating to the management of the affairs of the firm or the conduct of
its business or otherwise so conducts himself in matters relating to the business
that it is not reasonably practicable for the other partners to carry on the business
in partnership with him.30 Under Section 44 (d) it is necessary that there is wilful
or persistent breach of agreements relating to the business of the firm or the
26
See Carmicharl v. Eens. (1904) 90 LJ 573: (1904) 1 Ch. 486
27
Harrison v. Tennant, (1856) 21 Beav 482 111 RR 175.
28
Cheeseman v. Price, 35 Beav 142.
29
M. Smiline Rashida and others v. Ramenik, All 2006 Mad 368, 372-373.
30
The Indian Partnership Act, 1932, S. 44(d)

15
 conduct of a partner is such that it is not reasonably practicable for other partners
to carry on business with him. If the breach of agreement is not wilful, a single
breach shall not be sufficient to dissolve the firm. Constant or continuous
behaviour of enmity between the partners making the co-operation between them
impossible31, persistent refusal by one partner to perform his duties 32, one partner
habitually accusing the other partner of gross misconduct in the business 33, and to
maintain wrong accounts and not to enter the receipts34, are the examples of some
of the grounds on which the firm may be dissolved under this section. In the end it
may be noted that the firm may be dissolved by the court on the suit of a partner
other than one who is guilty.

e. Transfer of interest to a third party.

At the suit of a partner the court may dissolve a firm on the ground that a partner
other than the partner suing has in any way transferred the whole of his interest in
the firm to a third party, or has allowed his share to be charged under the
provisions of Rule 49 of Order XXI of the First Schedule to the Code of Civil
Procedure, 1908, or has allowed it to be sold in the recovery of arrears of land
revenue or of any dues recoverable as arrears of land revenue due by the partner 35.
If a partner transfers the entirety of their interest to a third party, they relinquish
all stake in the firm. Consequently, any remaining partner can seek the dissolution
of the firm by initiating legal proceedings on this basis. However, it is crucial to
note that the third party or transferee does not automatically assume the role of a
partner within the firm. Their rights are limited and do not extend to intervening
in business operations, demanding accounts, or inspecting the firm's books during
its continuance. The transferee's entitlement is confined to receiving the
transferred partner's share of profits, and they are obligated to accept the profit
distribution as agreed upon by the partners. If the firm is dissolved or if the trans
erring partner ceases to be a partner, the transferee is entitled, as against the
31
Baxter v. West, 127 HR 64.
32
Krishnamcharya v. Sankar, 22 Bom. LR 1343. . Watney v. Wells, 30 Beav, 56.
33
Watney v. Wells, 30 Beav. 56.
34
Cheeseman v. Price. (1865) 35 Beav. 142, 55 ER 849
35
The Indian Partnership Act, 1932, S. 44(e)

16
 remaining partners, to receive the share of the assets of the firm to which the
transferring partner is entitled, and for the purpose of ascertaining the share, to an
account as from the date of dissolution.

f. Business at loss
At the suit of a partner, the court may dissolve a firm on the ground that the
business of the firm cannot be carried on save at a loss. 36 According to the
definition of partnership as given in Section 4, the chief objective of partnership is
to acquire profits. If the circumstances are such that this chief objective cannot be
attained and the business of the firm cannot be carried on save at a loss, firm may
be dissolved by the court on this ground. Every partnership firm is established to
attain a particular objective and if the circumstances are such that it is not possible
to attain that objective, the remedy in such cases is to dissolve the firm 37.
Illustratively, in a particular instance, a partnership was formed with the objective
of mining mica. Subsequently, one of the partners initiated legal action seeking
the dissolution of the firm, citing ongoing financial losses. In response, the
remaining partners contested the suit, arguing that the partnership had a
predetermined duration and the plaintiff lacked valid grounds for prematurely
dissolving the firm.
Upon adjudication, the Court determined that Section 44 (f) is applicable in this
scenario. Consequently, it affirmed the plaintiff's entitlement to file a lawsuit for
the dissolution of the partnership and for an account of its financial transactions.

g. Just and equitable

At the suit of partner, the Court may dissolve a firm on the ground that it is just
and equitable that firm should be dissolved38. Section 44 (g) gives very wide
powers te the to the court. Whenever a case is brought to the court under Section
44 (g), the court has to decide whether it would be ‘just and equitable’, to dissolve
the firm and such matters cannot be left for the decision or award of the

36
The Indian Partnership Act, 1932, S. 44(f)
37
See also Jennings v. Baddley, (1856) 3K & 178.69 ER 1029.
38
The Indian Partnership Act, 1932, S. 44(g)

17
 arbitration39. In accordance with Section 44 (g), the court exercises its discretion,
and this discretion is not constrained by rigid or inflexible regulations. The court
must employ its discretion based on the specific facts and circumstances of each
case. For instance, in a particular case, where 4 out of 9 partners sought the
dissolution of the firm, holding a 7/9 share, and a lack of cooperation and mutual
trust existed among the partners, coupled with persistent and significant disputes,
the court deemed it just and equitable to order the dissolution of the firm.
However, in cases where the business was efficiently managed by the defendants,
yielding profits, and the plaintiff, despite violating the agreement, merely
obstructed the defendants' business management, the court would not order
dissolution. Additionally, the court refrains from granting dissolution when a
partner, filing the suit, is himself engaged in misconduct.
Under Section 44 (g), the court possesses very wide powers. To arrive at the
inference that it will be just and equitable to dissolve the firm the court may
consider the events subsequent to the filing of the suit

Last but not the least, it may be noted that Section 44 is not subject to contract
between partners. It confers right on partners to file suit for the dissolution of the
firm on the grounds mentioned in the section.

Rights of a Partner on Dissolution [Sections 46, 51 to 53]

The rights conferred upon a partner upon the dissolution of a partnership, as

stipulated in Sections 46, 51 to 53, can be summarized as follows:

(a) Partner's General Entitlement [Section 46]:

Every partner or their representative is entitled to:
(i) Have the firm's property applied for the settlement of the firm's debts.
(ii) Receive a distribution of the surplus among the partners or their
representatives in accordance with their respective rights.

39
Narindra Singh Randhwa v. Hardial Singh Dhillon, AIR 1985 P and H 41,42.

18
(b) Right to Claim the Return of Premium on Premature Winding Up [Section
51]:
A partner who joined a firm for a fixed term and paid a premium is entitled to
the return of the premium if the firm dissolves before the fixed term. However,
this right is not applicable in certain circumstances, such as dissolution due to the
death of a partner, misconduct of the premium-paying partner, or if the dissolution
agreement lacks provisions for the return of the premium.

(c) Rights of a Partner in Case of Dissolution on Account of Fraud or

Misrepresentation [Section 52]:
In cases where the partnership is rescinded due to fraud or misrepresentation,
the aggrieved partner has the following rights:
(i) A right of lien on surplus assets for sums paid for the purchase of a share or
contributed capital.
(ii) The right to be treated as a creditor of the firm for any payments made
towards the firm's debts.
(iii) The entitlement to indemnification from partners guilty of fraud or
misrepresentation against all the firm's debts.

(e) Right to Restrain from Use of Firm Name or Property [Section 53]:
In the absence of any contrary agreement, each partner or their legal
representative possesses the right to prohibit another partner or their
representative from involving themselves in a comparable business that
utilizes the firm's name or assets for personal gain until all the firm's affairs
have been completely resolved.

Liabilities of a Partner on Dissolution [Sections 45 and 47]

The liabilities imposed upon a partner upon the dissolution of a partnership are as
follows:

19
(a) Continuing Liability for Acts After Dissolution (Section 45):
Partners remain liable for acts done after dissolution until public notice is given.
Exceptions to this rule include the estates of deceased or insolvent partners and
sleeping or dormant partners who have retired.

(b) Continuing Authority of Partners After Dissolution [Section 47]:

After dissolution, a partner's authority to bind the firm and the mutual rights and
obligations of the partners continue as necessary to:
(i) Wind up the firm's affairs.
(ii) Complete unfinished transactions pending at the date of dissolution.

This overview aims to provide a concise understanding of the rights and liabilities
associated with the dissolution of a partnership as outlined in the specified
sections.

20