Describe the rights and liabilities of a partner on dissolution.

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Q.3      Describe the rights and liabilities of a partner on dissolution? 


The various rights of a partner on dissolution are as follows:

(a)        Partner’s general line [Section 48]

Every partner or his representative is entitled-

(i)         To have the firm’s property applied in payment of the firm’s debts, and

(ii)        To have the surplus distributed amongst the partners or the representatives according to their respective rights.

(b)        Right to claim the return of premium on premature winding up [Section 51]

If a partner joined a firm for a fixed term and had paid a premium and the firm is dissolved before the fixed term, he is entitled to return of the premium. The amount of premium will depend upon (i) the terms upon which become a partner, and (ii) the length of the time during which he was a partner. However, such a partner cannot claim any return of the premium in the following three circumstances:

(i)         When the dissolution is due to the death of partner;

(ii)        When the dissolution is mainly due to the misconduct of the partner who paid the premium; or

(iii)       The dissolution is according to an agreement, which had no provision for the return of premium or any part thereof.

(c)        Rights of a partner In case of dissolution on account of fraud or misrepresentation [Section 52]

Where the partnership is rescinded on grounds of fraud or misrepresentation, the aggrieved partner, besides other rights under other provisions, has the following rights:

(i)         He has a right of lien on the surplus assets after the payment of firm’s debts, for any sum paid by him for purchase of a share in the firm of for any capital contributed by him.

(ii)        He is entitled to rank as a creditor of the firm in respect of any payment made by him towards firm’s debts;

(iii)       He is entitled to be indemnified by the partner(s) guilty of fraud or misrepresentation against all the debts of the firm,

(d)        Rights to restrain from use of firm name or firm property [Section 53]

Unless otherwise agreed by the partners, every partner or his representative may rest4rain any other partner or his representative from carrying on a similar business in the firm name or from using the property of the firm for his own benefit till the affairs of the firm are completely wound



The various liabilities of a partner on dissolution are as follows:

(a)        Continuing liabilities for acts of partners done after dissolution [Section 451]

Until a public notice is given of dissolution, the partners continue to be liable for any act done by any of them after dissolution and such act is deemed to be an act done before the dissolution:


X, Y and Z are partners in a trading firm. They executed a dissolution deed to dissolve the firm as from 1st March but did not give public notice til! 31ft March. On 20th March, X borrowed Rs.20,000/^ in the firm’s name. The firm is liable.


The following shall not be liable for acts done after the dissolution of the firm even though the public notice has not been given:

(i)      The estate of a deceased partner;

(ii)    The estate of an insolvent partner;

(iii) A sleeping or dormant partner who has retired from the firm.

(b)        Continuing authority of partners after dissolution [Section 47]

After the dissolution of a firm, the authority of a partner to bind the firm and the other mutual rights and obligations of the partners continue, so far as may be necessary-

(i)      To wind up the affairs of the firm, and

(ii)    To complete the unfinished transactions pending at the date of dissolution.

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