Explain and illustrate the grounds on which a firm can be dissolved. A, B, C and D enter into partnership at will. After sometime D is adjudged insolvent. Is the firm dissolved?”
QUESTION 7 (Detailed Analysis – LLB Exam Style) “Explain and illustrate the grounds on which a firm can be dissolved. A, B, C and D enter into partnership at will. After sometime D is adjudged insolvent. Is the firm dissolved?” 1. Meaning of Dissolution of Firm Dissolution of a firm means the complete ending of the partnership business and relationship between all partners , as per the Indian Partnership Act, 1932 . After dissolution: The business stops Assets are sold Liabilities are cleared Profit or loss is distributed 2. Grounds on Which a Firm Can Be Dissolved The Indian Partnership Act, 1932 provides various grounds: I. Dissolution by Agreement (Section 40) A firm may be dissolved: By mutual consent , or According to a contract between partners . This is the simplest mode. Example: All partners sign a deed to close the business. II. Compulsory Dissolution (Section 41) A firm is compulsorily dissolved in two situations: a. Insolvency of all partners ...