A partner has paid a premium of Rs. 120000 on entering into partnership for a fixed term of 3 years. But after two years, the firm got dissolved. The partner claims Rs. 40000 premium refund. Is he eligible to get?
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True
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False
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Partly true
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Cannot say
B
Correct answer
Explanation
When a partner pays premium for joining for a fixed term and the firm dissolves prematurely, the partner is NOT entitled to a proportional refund of premium. Premium is for the privilege of joining and is not refundable unless specifically agreed upon. The answer 'False' correctly denies the refund claim.