Frustration of Partnership Firm

- Aishani Chakraborty
(2019118)
Introduction:
Partnership results from a contract and is governed by the Partnership Act 1932. The
partnership is also governed by the general provision of the Indian Contract Act on such
matters where the Partnership Act is silent. It is expressly mentioned that the provision of
India Contract Act which is not repealed will be applicable on Partnership until and unless
such provision is in contrary to any provision of Partnership Act, 1932. 
The Indian Partnership Act 1932 defines a partnership as a relation between two or more persons
who agree to share the profits of a business run by them all or by one or more persons acting for
them all.
When the partnership between all the partners of a firm is dissolved, then it is called dissolution
of a firm. It is important to note that the relationship between all partners should be dissolved for
the firm to be dissolved.

Object of study:
● To understand the significance of partnership act
● To understand the provisions for dissolution partnership firm

Scope of the study:

The study is limited to the Indian Partnership Act.

Significance of the study:

The study helps us to gain knowledge about the various provisions under which we can
dissolve partnership firms. It helps us understands the various provisions for frustration of the
firm.

Literature Review:
The researcher has taken information from various books, web sources, case laws, articles
and case laws.
Books –
Mulla, The Sale of Goods Act & The Indian Partnership Act, 11th ed – This book contains
vast information about the Indian Partnership Act and the Sections relating to it.
Web sources –
 https://advance.lexis.com – This site contains articles, books and various case notes about
my project topic.

Research Methodology:
The study is based upon doctrinal field of research.

Types of research:
This research is an explanatory study.

Abstract -
The dissolution of partnership between all the partners of a firm is called the dissolution of
the firm.
The Indian Partnership Act, 1932 recognises the difference between a dissolution of the firm
and a mere retirement of a partner. On dissolution each partner is paid his share of the profits,
if any, whereas on the retirement, death or adjudication of one partner, a dissolution does not
necessarily follow, for it may be a term in the partnership agreement that the firm should be
continued by the other partners.
S. 40. Dissolution by agreement -
A firm may be dissolved with the consent of all the partners or in accordance with a contract
between the partners.
A firm is dissolved —
 by the adjudication of all the partners or of all the partners but one as insolvent, or
 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:
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.

[s 41.1] Compulsory dissolution —

It is intended to connote a dissolution by operation of law on the happening of certain events.

It is also intended to emphasise the distinction between dissolutions by other methods, e.g.,
(i) by agreement (section 40), (ii) in accordance with the contract (section 42), (iii) by giving
of a notice in the case of a partnership at will (section 43), and (iv) by court (section 44)
 S. 42. Dissolution on the happening of certain contingencies – Subject to contract between the
partners a firm is dissolved,

 if constituted for a fixed term, by the expiry of that term;

 if constituted to carry out one or more adventures or undertakings, by the completion
thereof;
 by the death of a partner; and
 by the adjudication of a partner as an insolvent.
S. 43. Dissolution by notice of partnership at will -
 Where the partnership is at will, the firm may be dissolved by any partner giving
notice in writing to all the other partners of his intention to dissolve the firm.
 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.
S. 44. Dissolution by the Court -
At the suit of a partner, the Court may dissolve a firm on any of the following grounds,
namely:
 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;
 that a partner, other than the partner suing, has become in any way permanently
incapable of performing his duties as partner;
 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;
 that a partner, other than the partner suing, wilfully 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;
 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;
 that the business of the firm cannot be carried on save at a loss; or
 on any other ground which renders it just and equitable that the firm should be
dissolved.