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Disolution of firm

Umesh Pokhariya (Student) (24 Points)

13 April 2014

Is there dissolution of firm by death of a partner if there are more than 2 partners in that firm?

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Deepak Gupta (CA Student) (15922 Points)
Replied 14 April 2014

Originally posted by : Umesh Pokhariya
	Is there dissolution of firm by death of a partner if there are more than 2 partners in that firm?

As a general rule, the death of a partner of a firm normally results in the dissolution of the partnership firm. However, under section 42(c) of the Indian Partnership Act, 1932, the rule in regard to the dissolution of the partnership by death of partner is subject to a contract between the partners of the firm. Accordingly, the partners of the firm may agree that the death of one partner will not have the effect of dissolving the partnership as regards the surviving partners unless the firm of partnership consists of only two partners.
- CIT vs. G.S. Mill (AIR) (1966) (SC) 24.
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In case where a partner of a firm dies, the following three alternative options are available for the partners:
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-> the legal representative of the deceased partner may step into the position of the deceased partner by means of a fresh agreement with the surviving partners of the firm; or
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-> the surviving partners of the firm may continue the firm by purchasing the deceased partner’s share; or
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-> the partnership may be dissolved.