What are the consequences of dissolution of Partnership ?

Since dissolution initiates the process of winding up the affairs of the firm some rights are inferred and some obligation are imposed upon the partners to do the needful in this regard . Such consequences are covered under the Indian Partnership Act 1932 vide Vide Sec 45 to Sec 55

Section 45- Liability for acts of Partners done after Dissolution

(10 Notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them, which would have been an act of the firm if done before the dissolution, until public notice is given of the dissolution:

It is further provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable under this section for acts done after the date on which he ceases to be a partner. Notices under sub-section (1) may be given by any partner.

Section 46- Rights of Partners to have Business Wound up after Dissolution

On the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representa­tives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or their representatives accord­ing to their rights.

Section 47- Continuing authority of Partners for Purposes of Winding up

After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners continue notwithstanding the dissolution, so far as may be necessary to wind up the affair of the firm and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise:

It is provided that the firm is in no case bound by the acts of a partner who has been adjudicated insolvent; but this proviso does not affect the liability of any person who has after the adjudication represented himself or knowingly permitted himself to be represented as a partner of the insolvent.

Settlement of accounts is very important in the partnership business. Section 48 deals with it.

Section 48- Mode of Settlement of accounts between Partners

In settling the accounts of a firm after dissolution, the follow­ing rules shall, subject to agreement by the partners, be observed-(a) Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital, and, lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits;