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

Meera, Nikhil and Obaid run a firm in Pune. Meera, without consulting anyone, retires from the firm by giving notice, and the partnership has no fixed term and no agreement on retirement. Nikhil and Obaid continue the business. Which statement best describes the legal position of Meera's retirement under the Indian Partnership Act, 1932?

Meera, as a partner in a firm at will, can retire by giving notice to all the other partners. Her liability for acts done before retirement continues until it is discharged by agreement with creditors. The firm does not dissolve automatically, and no Registrar permission is needed.

  1. AMeera cannot retire unless Nikhil and Obaid both give written consent
  2. BMeera can retire by giving notice to all the other partners, as the partnership is at will, and her liability for past acts continues until dischargedCorrect
  3. CMeera's retirement dissolves the firm automatically, and Nikhil and Obaid must start a new firm
  4. DMeera can retire only with the permission of the Registrar of Firms, after which her liability for earlier debts ends at once

Explanation

Under the Act, a partner may retire with the consent of all other partners, in accordance with an express agreement, or, where the partnership is at will, by giving written notice to all the other partners of her intention to retire. Retirement does not by itself discharge her from liability for acts done before retirement; that needs an agreement with the third party and the continuing partners. The option on automatic dissolution is wrong because a retirement does not dissolve a firm that continues with the remaining partners.

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