Various Modes of Dissolution of the Firm

Dissolution by Agreement

A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners.

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:

It is further 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 undertakings.

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 insolvent.

Dissolution by notice of partnership at will

(1) Where the partnership is at will, any partner giving notice in writing to all the other partners of his intention to dissolve the firm may 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.

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;

(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, willfully 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;

(e) 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 (5 of 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;

(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 dissolved.