Dissolution of Partnership firm

[Arun Aggarwal]

A Firm is registered under Indian Partnership Act consisting of two partners. If one of partners expire and out of four legal heirs of deceased partner , one legal heir with written consent of other three legal heirs , becomes partner of said firm from the date of death of deceased partner.

A) Will above be treated as dissolution of firm or continuation of firm ? Please support your reply with case laws

B) Can any debtor deny to pay debt on the ground that firm have been dissolved on death of one of partners?

[KASTURI SETHI]

Dear Querist,

Ans. to Q.A :Firm stands dissolved on the death of one of the partners on the same day. Pl. peruse the following judgement of CESTAT Kolkota which holds that the partnership stands dissolved.

 B.B. BOSE & SONS Vs. COMMISSIONER OF CUSTOMS, CALCUTTA - 1999 (5) TMI 573 - CEGAT, KOLKATA

 

[Arun Aggarwal]

Kasturi always the first tnx

can you pls eloberate the answer of the point no 2

[Padmanathan KV]

I agree, the firm stands dissolved on death of one of the two partner (even if there is any clause in the deed to the contrary).

Mohd Laiquiddin v Kamala Devi Misra (deceased) represented by LRs 2010 (1) TMI 1246 - SUPREME COURT

26. In the light of aforementioned case, it is clear that when there are only two partners constituting the partnership firm, on the death of one of them, the firm is deemed to be dissolved despite the existence of a clause which says otherwise. A partnership is a contract between the partners. There cannot be any contract unilaterally without the acceptance by the other partner. The Appellants, the legal representatives of original plaintiff (since deceased) was not at all interested in continuing the firm or constitute a fresh firm and they cannot be asked to continue the partnership, as there is no legal obligation upon them to do so as partnership is not a matter of heritable status but purely one of contract, which is also clear from the definition of partnership under Section 4. Therefore, the trial court was justified in holding that the firm dissolved by virtue of death of one of the partners and the first appellate court as well as the High Court have taken the correct view in upholding the same.

Commissioner of I.T v. Seth Govindram Sugar Mills 1965 (3) TMI 24 - SUPREME COURT

AI Summary

Dissolution on death of partner: two-partner firm ends unless heirs form a new agreement promptly. When a partnership has only two partners, the partnership is dissolved on the death of one partner; the partnership is contractual and not heritable, so legal representatives of the deceased are not obliged to continue the firm and a clause in the deed cannot unilaterally bind them. Continuation requires a fresh agreement or acceptance by successors; absent that, the firm is to be treated as dissolved despite any purported deed provision.