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Ravi rescinds his partnership contract in Sundaram Traders because of the fraud of partner Hari. Before rescission, Ravi paid Rs 1,20,000 out of his own pocket towards the firm's debts. What is Ravi's position regarding this payment?

Ravi can rank as a creditor of the firm for the Rs 1,20,000 he paid towards its debts. Section 52(b) gives the party rescinding for fraud or misrepresentation this right, without prejudice to any other right such as indemnity from the guilty partner.

  1. AHe may rank as a creditor of the firm for Rs 1,20,000Correct
  2. BHe may only claim it as additional capital after other creditors
  3. CHe loses the claim since he chose to rescind
  4. DHe may claim it only from Hari and not as a creditor of the firm

Explanation

Section 52(b) entitles the rescinding party to rank as a creditor of the firm for any payment made towards the firm's debts. This is without prejudice to other rights, so the claim against Hari under clause (c) does not remove it.

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