Question

Which of the following will result in dissolution of a partnership firm?

• A. Death of a partner.
• B. Insolvency of a partner.
• C. When the business of the firm becomes illegal.
• D. Expiry of the period of partnership.

Hint:

Unlawful business operations result in compulsory dissolution of the firm under partnership law, while other events like death or insolvency only affect the partnership unless stated otherwise.

Answer 1

The Correct Option is C

Step 1: Under Section 41 of the Indian Partnership Act, 1932, compulsory dissolution of a firm occurs when: 
- All partners (or all but one) become insolvent, or 
- The business of the firm becomes unlawful/illegal. 
Step 2: Let's examine each option: - (A) Death of a partner\(\Rightarrow\) Dissolution of partnership (not necessarily firm) 
- (B) Insolvency of a partner\(\Rightarrow\) Can result in dissolution of partnership, not necessarily firm unless deed provides 
- (C) Illegality of business\(\Rightarrow\) Compulsory dissolution of firm 
- (D) Expiry of period\(\Rightarrow\) This leads to dissolution of partnership (may be continued by agreement) 
Step 3: Therefore, only option (C) leads to compulsory dissolution of the firm.