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CA Foundation · Business Laws · The Indian Partnership Act, 1932

Arun, Bela and Chetan are partners in a firm formed for a fixed term of 5 years. After 2 years, Arun wants to end the firm because he is tired of the business, though no partner has breached any duty and no court order exists. The deed is silent on early dissolution. What is the legal position?

A fixed-term firm cannot be ended early by one partner's notice. Notice-based dissolution is available only to a partnership at will. Before expiry, the firm can be dissolved only by mutual consent of all partners or by a court on a recognised ground, so Arun cannot dissolve it alone.

  1. AArun can dissolve the firm at once by giving notice, since any partner may do so
  2. BThe firm can be dissolved before the term ends only by agreement of all partners or on grounds on which a court may order dissolutionCorrect
  3. CThe firm stands dissolved automatically after 2 years
  4. DArun can dissolve the firm if the majority of partners are not present

Explanation

A firm for a fixed term cannot be dissolved at the will of one partner by notice; that right exists only for a partnership at will. Without a breach or other court ground, dissolution before expiry needs all partners' consent. Option A confuses a fixed-term firm with a firm at will.

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