Types of Partners - Dissolution

 Explain the various kinds of partners and precedure for dissolution of a partnership firm.

Kinds of Partners

  1. Active Partner: Also known as a managing partner, this partner takes an active role in the day-to-day operations of the business.

  2. Sleeping Partner: This partner invests capital in the business but does not participate in its management.

  3. Nominal Partner: This partner lends their name to the business but does not invest capital or participate in management.

  4. Partner by Estoppel: This partner is not officially a partner but behaves in a way that leads others to believe they are.

  5. Partner in Profits Only: This partner shares in the profits of the business but not in its losses.

  6. Minor Partner: A minor can be admitted to the benefits of partnership with the consent of all partners.

Procedure for Dissolution of a Partnership Firm

  1. Dissolution by Agreement (Section 40): The firm may be dissolved with the consent of all partners or as per the terms of the partnership agreement.

  2. Compulsory Dissolution (Section 41): The firm is dissolved if all partners, except one, are declared insolvent or if the business becomes unlawful.

  3. Dissolution on the Happening of Certain Contingencies (Section 42): The firm is dissolved if a partner dies, becomes insolvent, or if the partnership was for a fixed term and that term expires.

  4. Dissolution by Notice (Section 43): In a partnership at will, any partner can dissolve the firm by giving notice to all other partners.

  5. Dissolution by Court (Section 44): The court may dissolve a firm on various grounds, such as a partner's incapacity, misconduct, persistent breach of the partnership agreement, or if the business can only be carried on at a loss.

Case Laws Illustrating Dissolution of Partnership

  1. Suresh Kumar Sanghi v. Amrit Kumar Sanghi (1982): This case highlighted the dissolution of a firm by the court due to a partner's misconduct.

  2. Narayanappa v. Bhaskara Krishnappa (1966): This case emphasized the dissolution of a firm on the grounds of a partner's incapacity.

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