Page 175 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes a case partnership is dissolved, because trading with an alien enemy is against public
policy.
Section 41 covers cases of compulsory dissolution of firm by operation of law.

(vi) By notice of dissolution of partnership at will: Section 43 provides that where the
partnership is at will, a partner may give a notice in writing to the other partners of his
intention to dissolve the firm. The notice must state the intention to dissolve the firm and
be in writing. The firm is dissolved as from the date mentioned in the notice as the date of
dissolution, or if no date is mentioned then from the date of communication of the notice.
Filing a suit for dissolution is not a notice as required by this section. In such a case, the date of
dissolution will be the date of passing of the preliminary decree for dissolution [Banarsi Das v.
Kanshi Ram , A I R (1983) S.C. 1165].

6.7.4 Dissolution by Court (s.44)

At the suit of a partner, the court may dissolve a firm on any of the following grounds:
(a) If a partner has become of unsound mind: The application in this case may be made by any
of the partners or by the next friend of the insane partner. In the case of insanity of a
dormant partner, the court will not order dissolution, unless a very special case is made
out for dissolution.
(b) Permanent incapacity of a partner: The court may order for dissolution of partnership, if
a partner becomes permanently incapable of performing his duties as a partner. The
application for dissolution, in such a case, may be made by any of the partners and not by
the incapacitated partner. However, where a partner is attacked with paralysis which, on
evidence, is found to be curable, dissolution may not be granted.
(c) Misconduct of a partner affecting the business: If a partner is guilty of conduct which is
likely to affect prejudicially the carrying on of the business of the firm, the court may
order dissolution.

Examples:
(i) A partner of a mercantile firm is engaged in speculation in cotton. This act may be
regarded a sufficient ground for dissolution of the firm.
(ii) A partner of a firm is travelling on the railway without a ticket and with intent to
defraud. The court may grant dissolution. Also, the court may grant dissolution for
conviction for an offence involving moral turpitude. Thus, a partner may misapply
money of a client, or he may be involved in an adultery. In any case, the suit for
dissolution can only be brought by the other partners.
(d) Wilful and persistent disregard of partnership agreement by a partner: If a partner wilfully
and persistently commits a breach of the partnership agreement regarding management,
or otherwise conducts himself in such a way that is not reasonably practicable for the
other partners to carry on business in partnership with him, the court may order dissolution.
Continuous refusal by a partner to attend to his duties in the partnership business, the fact
of hostility between the partners which makes cooperation between them impossible,
have been held to be sufficient reasons for dissolution. The suit for dissolution under this
ground can be brought by a partner other than the guilty partner.
(e) Transfer of interest or share by a partner: If a partner transfers, in any way (e.g., by sale,
mortgage or charge), his whole interest in the partnership to a third party (outsider) or
allows his share to be charged in execution of a decree against him or allows the same to

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