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Question

On the death of a partner, when can the partnership business continue?

I.              When there are more than 2 partners in the firm

II.            When there are 2 or more than 2 partners in the firm

III.           When the legal representative is interested in taking forward the business

IV.          When the partnership deed is silent on the dissolution clause on death of a partner

A I and II Correct Answer Incorrect Answer
B I and III Correct Answer Incorrect Answer
C I and IV Correct Answer Incorrect Answer
D I, II and III Correct Answer Incorrect Answer
E I, III and IV Correct Answer Incorrect Answer

Solution

When a partner dies, subject to any contract to the contrary, partnership is dissolved. Section 42 of the Indian Partnership Act, 1932 (“Act”) provides for dissolution of partnership on occurrence of certain contingencies which includes ‘death of the partner’ as one of those contingencies. However, in cases where the terms of the partnership deed are silent on continuation of partnership’s business, a contract to continue the partnership after the death of a partner may be implied from the conduct of the parties. This means that where it is evident that such an intention was present, the nominee or legal representative of the deceased partner can take the place of deceased partner and business of the firm can be continued with the presumption that the partnership was never dissolved on the death of that partner. The above legal position is based on two assumptions- (a) there are more than two partners in the firm, and (b) the legal representatives are interested in taking forward the business of the firm.

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