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CMA Intermediate · Business Laws and Ethics · Indian Partnership Act, 1932

Anil retired from a firm, and public notice was never given. Karan, who had never heard of Anil and did not know he had ever been a partner, sold goods on credit to the firm after Anil's retirement. Karan later sues the firm and Anil. Which statement is correct?

Anil is not liable to Karan. Although no public notice of retirement was given, a retired partner is not liable to a third party who dealt with the firm without knowing he was ever a partner. Karan had no such knowledge, so the proviso protects Anil.

  1. AAnil is liable because no public notice was given
  2. BAnil is not liable to Karan because Karan dealt with the firm without knowing that Anil was a partnerCorrect
  3. CAnil is liable only for half of the debt
  4. DAnil is liable only if the firm cannot pay

Explanation

Section 32(3) makes the retired partner liable until public notice is given, but its proviso says he is not liable to a third party who deals with the firm without knowing that he was a partner. Karan never knew Anil as a partner, so the proviso applies and Anil escapes liability.

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