Regarding to Retirement of Partner

This query is : Resolved

Suresh S. Tejwani (Querist)
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23 July 2024 Mr. A, B and C are the partners in the partnership firm. Mr. A and his family are not in the contact of other partners. For the bank KYC all partner's proof is required. Therefore, other partner's wants to retire Mr. A form the partnership firm. Is It possible to retire Mr. A from the partnership firm without his sign? If no, then what is the procedure of Retirement of Mr. A from Partnership Firm?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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24 July 2024 Yes.
Section 33: Expulsion of a partner
There are various reason why a partner may be expelled from a partnership firm. A partner of a firm may not be dismissed from a partnership firm by a majority of the partner except in exercise, in good faith, of powers conferred by contract between the partners. An expulsion is not deemed to be in a proper interest of the business of the firm if the conditions below are not fulfilled.

The power of expulsion must be stated in a contract between the partners.
A majority of the partners must exercise the power.
It has to be exercised in good faith.
The test of good faith as required for expulsion as stated under Section 33(1) includes three aspects.

The expulsion must be in the best interest of the partnership.
The partner that is to be expelled must be served with a notice.
The partner has to be given the opportunity of being heard.
If a partner is expelled without fulfilling these conditions, the expulsion is considered null and void. The only solution, when a partner is involved in misconduct in the business of the firm, is to seek judicial dissolution. It should be noted that the expulsion of partners does not always result in the dissolution of the firm. An invalid expulsion of a partner does not bring the partnership to an end even if the partnership is at will and it will be deemed to continue as before.