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

Lata, Manoj and Nitin are partners. Lata retires on 31 March, and the firm continues. A supplier, Bharat Traders, who had dealt with the firm earlier and knew Lata as a partner, receives no notice of her retirement. In June, the firm buys goods on credit from Bharat Traders, who has no knowledge of the retirement. Which statement is correct?

Lata is liable to Bharat Traders for the June purchase. A retiring partner remains liable to those who dealt with the firm before retirement until public notice or actual notice is given, and Bharat Traders received neither.

  1. ALata is not liable because she had retired before the purchase
  2. BLata is liable to Bharat Traders for the June purchase, as no public or actual notice of retirement was given to itCorrect
  3. CLata is liable only to the extent of her capital contribution
  4. DLata is liable only if the firm is registered

Explanation

A retiring partner continues to be liable for acts of the firm done after retirement to anyone who dealt with the firm earlier and had no notice. This liability ends only by giving public notice, or actual notice to the particular customer. Since Bharat Traders had dealt with the firm and had no notice, Lata remains liable. Her capital contribution does not limit this.

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