View Full Version : State the grounds on which the court may dissolve a partnership firm at the suit

11-30-2011, 08:52 PM
Dissolution of firm
Q. State the grounds on which the court may dissolve a partnership firm at the suit of a partner.
Q. What are the various modes of dissolution of partnership? Discuss in detail the ground on which court may dissolve firm.
1. Introduction:
The partnership can be dissolved easily by mutual consent of the partners. Formal document are not required for this purpose. Dissolution of firm, includes the dissolution of partnership but the dissolution of the partnership may or may not include the dissolution of the firm.
2. Meaning of dissolution:
Dissolution of the firm means end of the firm.
3. Grounds of dissolution of firm:
Following are the grounds of dissolution of a firm.
(I) Dissolution by agreement:
A firm may be dissolved with the consent of all the partners. The consent of majority is not enough to dissolve a partnership firm.
(II) Compulsory dissolution:
A firm is dissolved:
(i) When all partners are declared insolvent.
(ii) When all except one of the partners are declared insolvent,
(iii) When the business carried on by the firm becomes un-lawful.
(III) Contingent dissolution:
Subject to the contract between the partners a firm is dissolved:
(i) If constituted for a fixed term, by the expiry of that term.
(ii) On the completion of the object for which the firm was formed.
(iii) On the death of a partner.
(iv) On the insolvency of a partner.
(v) On the resignation of a partner.
(IV) Dissolution by notice:
(a) Where the partnership is at will, the firm may be dissolved by any partner by giving notice in writing to all the other partner of his intention to dissolve the, firm.
(b) The firm is dissolved as form the dissolution or if no date is mentioned, as from the date of communication of his notice.
Case law
1985 CLC 2836
It was held that one of the partner can sign and verify a plaint on behalf of the firm dissolution of the firm, in a suit for the purpose of its winding up.
(V) Dissolution by the court:
According to Sec. 44 court can dissolve on the following grounds.
(a) Unsoundness of mind:
If a partner has become of unsound mind, the court may dissolve the firm.
(b) Permanent incapability:
If a partner other than the partner suing, has become in any way permanently incapable of performing his duties as a partner.
(c) Misconduct:
When a partner except the partner suing is guilty of misconduct, which may affect the reputation of the firm.
(d) Breach of agreement:
If a partner commits breach of agreement relation to the management of the affairs of the firm or the conduct of the business the court may order for the dissolution of the firm.
(e) Transfer of interest:
When a partner, except the partner suing, has transferred the whole of his interest in the firm to a third party without the consent of the other party.
(f) Just and equitable cause:
When on any other ground the court considers it just and equitable that the firm should be dissolved the court may order for the dissolution of the firm.
4. Conclusion:
To conclusion it can be that, dissolution of firm is end of firm under partnership act. There are five modes of dissolution of firm. Dissolution of firm may not necessarily mean dissolution of partnership as in the case of dissolution of partnership, the firm may continue with some of the remaining partner.