Question

Which of the following will not result in compulsory dissolution of a partnership firm?

• A. When all partners or all but one partner become insolvent.
• B. When the business of the firm becomes illegal.
• C. When some event has taken place which makes it unlawful for the partners to carry on the business of the firm in partnership.
• D. When a partner dies.

Hint:

Remember: Death of a partner leads to dissolution of the partnership, not necessarily the firm — unless the deed says otherwise. Compulsory dissolution occurs only in extreme legal or insolvency situations.

Answer 1

The Correct Option is D

Step 1: According to Section 39–44 of the Indian Partnership Act, 1932, a firm is compulsorily dissolved under certain conditions such as:
- All partners or all except one partner become insolvent.
- The business becomes unlawful or illegal.
- An event occurs that makes it unlawful for the firm to continue its operations.
Step 2: However, death of a partner does not lead to compulsory dissolution. It results in dissolution only if the partnership deed does not provide otherwise. The firm may continue with remaining partners if mutually agreed.
Step 3: Hence, the correct answer is the option that does not result in compulsory dissolution — i.e., when a partner dies.