Tag: partnership 4 - dissolution of a partnership firm

If a partner has become permanently incapable of performing his duties as a partner then another partner can sue for dissolution of firm. Incapable of performing his duties can be due to any reason like going abroad for long time or imprisonment of partner for a long time. As a partner would not be able to perform his duties, the court may order for dissolution. 

A joint Hindu Family is a type of organisation in which all the members of a Hindu Undivided Family manage and control the business under the direction of head of the family. In this all the members become coparcener. It comes into existence by operation of Hindu law.  The existence of Joint Hindu Family is not affected by the death of a coparcener because remaining coparcener can continue the business. 

Dissolution can be done by suing the other partners and bringing the case to the court. According to Section 44 , if court finds it just and equitable then court may order for dissolution. Reason could be insolvency of a partner, Death of partner, when a partner becomes of unsound mind etc. 

Section 72 lays down the manner and the cases in which the public notice of certain matter relating to partnership firm is to be given. According to this section, If on dissolution of a registered firm a public notice is not given, the partners shall continue to be liable to third parties for any act done by any of them which would have been an act of the firm done before dissolution.  

In case  of partnership at will a partner can dissolve it by giving notice of dissolution to other partners. The notice should be communicated to other partners as mentioned in agreement and if not mentioned then mode of communication should be reasonable. The notice should be clear and should not be confusing. 

According to Section 44 of the Indian Partnership Act, Insanity of a partner and Misconduct by partner can be cause of dissolution of firm by court. If a partner has transferred his interest to third parties, other partners may apply to the firm to dissolve the firm. But ill health of a partner can not be the cause of dissolution of a firm because ill health is temporary. 

Section 72 lays down the manner and the cases in which the public notice of certain matter relating to partnership firm is to be given. if no public notice is given then the partners continue to be liable to third parties in case of dissolution, retirement and expulsion. Minor partner within six months of attaining eighteen years of age choose to become or not to become partner and specify the same by way of public notice. If no public notice is given then minor deemed to have become a partner of the firm. 

1. When a partner in a firm is adjudicated an insolvent he ceases to be a partner on the date on which the order of adjudication is made, whether or not the firm is dissolved. 
   2. Where under a contract between the partners the firm is not dissolved by the adjudication of a partner as an insolvent, the estate of a partner so adjudicated is not liable for any act of the firm and the firm is not liable for any act of the insolvent, done after the date on which the order of adjudication is made. 

Partners can determine their mutual rights and duties by an agreement called partnership deed. Partnership Deed is an important part of partnership. It clearly states the duties of partners. Any change in duties such as duty to work without remuneration, duty to contribute to losses, duty to indemnify for losses caused due to willful negligence can be made by making changes in partnership deed.

Registration of partnership firm is not compulsory but partners prefer to get it registered. Because if a partnership firm is not registered it can not file a suit against any third party. No partner can file a suit against any other partner. The firm can not file a suit against any partner. But third party can file a suit against firm.