Dissolution of a firm takes place on the happening of certain contingencies. Choose them from the following :
(A) By the death of a partner
(B) By the adjudication of a partner as an insolvent
(C) When the business of the firm becomes illegal
(D) If constituted for a fixed term, by the expiry of that term
Choose the correct answer from the options given below:
Dissolution of a firm takes place on the happening of certain contingencies. Choose them from the following :
(A) By the death of a partner
(B) By the adjudication of a partner as an insolvent
(C) When the business of the firm becomes illegal
(D) If constituted for a fixed term, by the expiry of that term
Choose the correct answer from the options given below:
Solution
Under the Indian Partnership Act, 1932, dissolution of a firm can occur in different ways. The question specifically asks about dissolution on the happening of certain contingencies, which is covered under Section 42 of the Act.
Analysis of each statement:
(A) By the death of a partner - This falls under Section 42 as a contingency leading to dissolution (unless the partnership agreement states otherwise). ✓
(B) By the adjudication of a partner as an insolvent - This is also covered under Section 42 as a contingency. When a partner is declared insolvent, the firm dissolves. ✓
(C) When the business of the firm becomes illegal - This falls under Section 41 (Compulsory Dissolution), not under contingencies. This is a mandatory ground where the firm must dissolve as it cannot continue with an illegal business. ✗
(D) If constituted for a fixed term, by the expiry of that term - This is covered under Section 42. When the specified term ends, dissolution occurs. ✓
The distinction here is between:
- Dissolution on happening of contingencies (Section 42) → includes death, insolvency, expiry of term
- Compulsory dissolution (Section 41) → includes business becoming unlawful/illegal
Since the question specifically asks about contingencies, only (A), (B) and (D) qualify.
Correct Answer: Option 1